FTSE 100 Friday close: Blue-chips tumble as traders offload supermarkets

14th March 2014

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The FTSE 100 endured a dire week as Morrison’s disappointing market update saw it and supermarkets across the board take a hit writes Philip Scott.

The leader-board closed on Friday at 6,527.89, 3% lower over the week, and 25.89 points or 0.4% down on the day. Morrison endured the steepest fall over the trading week, with its shares closing on Friday at 208p, marking a 12% collapse.

In its preliminary results for the year ended 2 February, the group announced that underlying profit before tax dropped to £785m, 13% down on the previous 12 month’s £901m.

Chief executive Dalton Philips warned that profits would take a hit going forward as the group will be “significantly reducing” its cost base and will invest £1bn into the business in a bid to take on the heavy discounters Lidl and Aldi.

He said: “Our expectations are that the challenging consumer and market environment we saw in 2013 will persist through the coming year. Our profit expectations reflect this, and our determination to be a stronger value leader for our customers. At this early stage in the year, we anticipate that underlying profits in 2014/15 will be in the range of £325m – £375m.”

The bearish news spilled over into the sector as Tesco shares fell 6% over the week to close at 303.7p while Sainsbury, reporting next week, nosedived 7% to 313.6p.

On Wednesday, the world’s biggest security group G4S reported a £170m pre-tax loss for last year, down from a £158m profit the year before. The firm, off 6% at 229.4p, also agreed a deal with the Government over its much-publicized tagging scandal, agreeing to repay a total of £109m.

Graham Spooner, investment research analyst at The Share Centre, who rates the stock a ‘hold’ said: “G4S announced preliminary results this morning that would disappoint many investors as it failed to provide any clarity on its problems with the UK government. The ongoing investigations remain and investors will be concerned that it is still suspended from bidding for government work.”

Meanwhile miner Glencore Xstrata was also lower over the week, by 9% at 297p, while telecoms giant Vodafone closed 7% lighter at 222.15p.

Royal Bank of Scotland witnessed its shares slump by 8%, closing at 299.5p, after credit rating agency Moody’s slashed its rating to Baa1 from A3. The agency said the “bank has limited financial flexibility to manage unforeseen events”.

The troubled bank’s Footsie-listed peers did not fare much better. Barclays, which is looking to review its investment banking arm fell 7% to 231.15p, HSBC lost 3% to 598.1p, Lloyds loosened 4% to 78.38p while Standard Chartered slid 6% to 1,190.5p.

During a week that saw only a handful of blue-chips shares move north, precious metal miner Rangold Resources had the best ride, rising by 2% to close at 4,996p, while British Gas parent Centrica, upgraded by analysts at Berenberg Bank to a ‘buy’, also firmed 2% to 330.5p.

Others bucking the trend included, Rolls-Royce, up 1% at 1,033p, and retailer Next, updating the market next week, moved 1% higher to 6,585p.

Also bringing updates next week are Antofagasta and United Utilities.

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