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FTSE 100 heads higher despite supermarket shake-out as Amazon pounces

Late surge sees FTSE 100's loss on the week sliced to 83 points
picture of Amazon logo
Not good news for supermarkets ... or Whole Foods' employees, probably
  • FTSE 100 up  44 at 7,464

  • Empyrean Energy the star performer after operational update

  • Tesco eases lower even with strong sales

  •  Amazon shakes US and UK sector with Whole Foods buy

The FTSE 100 finished the day in positive territory, despite food retail shares being about as popular as three-week old fish paste.

The decision by Amazon.com Inc (NASDAQ:AMZN) to move into bricks & mortar grocery retailing with its acquisition of Whole Foods Market Inc (NASDAQ:WFM) not only knocked US retailers for six, it had the likes of Tesco PLC (LON:TSCO), J. Sainsbury PLC (LON:SBRY) and Marks & Spencer Group PLC (LON:MKS) on their knees, too.

Tesco shed 4.9% at 171.1p on a day that had started well for the supermarkets group, as it reported its strongest quarterly UK sales growth in seven years.

READ Tesco's sales rise as price cuts attract customers but analysts warn inflation may hit margins

READ Amazon Inc poised to clinch its biggest ever deal by splashing US$13.7bn on Whole Foods Market Inc

Sainsbury’s got off a bit more lightly, sliding 3.9% while M&S fell 1.9%.

Despite these falls, the top-shares index rose 44 points to 7,464, cutting its losses for the week to 83 points.

The best performing stock of the day was Empyrean Energy PLC (LON:EME), up 50% at 7.5p.

The oil and gas development company with interests in China, Indonesia and the United States gave an operational update in which it revealed that at the Dempsey/Alvares prospect in California the farm-in and operating agreements are close to being agreed.

4pm - FTSE 100 up around 22 as market steadies after rate rise worries

FTSE 100 is up 22 points going into the close but supermarkets are taking a hit from the Amazon news, and US stocks are lagging.

It comes as the market begins to steady and get used to the notion that UK interest rates may rise at some point, after yesterday's surprise vote.

One big cap heading north is stalwart engineer Rolls Royce (LON:RR.), which added 1,45% to 908p as it said it had started the year well in a pre-close update ahead of  half year results in August, and full year expectations for revenue, profit and free cash flow remain unchanged from  February.

Plumbers merchant and FTSE 250 firm Wolseley (LON:WOS) also gained, nudging 0.38% higher as it got a broker upgrade from City firm Liberum, which is upbeat on the group's exposure to the growing US market.

Elsewhere, in small caps Solgold (LON:SOLG) shares surged over 11% to 2.75p as it revealed it has raised $41.2 million through a placing backed by a sUBSidiary of Newcrest Mining (ASX:NCM) -  Australia's biggest gold producer.

Tesco (LON:TSCO) is the biggest faller on the FTSE 100, down 4.89% to 171.15p. Sainsbury's (LON:SBRY) is down almost 4% at 252p.

3.24pm: Massive play by Amazon leaves rivals quaking - Wilson

Neil WIlson at ETX Markets said: “A big, big play by Amazon for Whole Foods in a deal worth $13.7bn that is leaving rivals quaking. 

"This is a huge development for US retail, yet another signal of the seismic shift in the market caused by the Amazon model. Amazon looks set to dominate the food sector now just as much as it does non-food. Amazon brings incredible scale and pricing power that will make life a lot tougher for anyone else.


"It’s caused carnage among retailers. Big US retailers are being smashed. Wal-Mart is down 6% and Target has shipped 10% on the announcement.  Costco fell 8% and Kroger plunged 15%. It’s fair to say there will be crisis board meetings at these companies after this move. Amazon shares jumped 3% on the deal, although it remains shy of its all-time peak. Whole Foods has surged 27%.

"UK supermarkets are also falling. Tesco and Sainsbury’s both dipped about 3% on the news and Morrisons also slipped more than 1%. Whole Foods has just 9 stores in the UK so the impact on Morrisons (which has its own tie-up with Amazon) should not be too significant, and if anything could support Morrisons if it signals how Amazon might be able to help it grow market share.”

FTSE 100 up 29 at 7,449.

3pm ... FTSE 100 slips back as as Amazon splurges US$13.7bn on Whole Foods

The spectre of a world dominated by Amazon moved a little bit closer as the online retailer stunned US investors with an audacious US$13.7bn takeover of US food chain Whole Foods.

US grocery rivals tumbled on the news and even supermarket chains in the UK quaked with J Sainsbury plc (LON:SBRY) down 3.2% at 253p, Wm Morrison PLC 0.5% down and Tesco shedding 4.6% to 171.7p.

FTSE 100 down 33 a t5,452.

2pm… FTSE 100 holds onto gains in spite of expected weak start on Wall Street

FTSE100 has held on to early gains even though spread bet firms expect a weakish start for shares on Wall Street.

Footsie was up 38 points to 7,458, though this was of its best for the day as the Dow Jones Industrial Average is predicted  to shed around seven points to 21,351 when trading gets started.

Google owner Alphabet will be one to watch as the New York Times reported it faces a €1bn plus fine from the European Union over breaches of anti-competition rules.

Anonymous sources close to the European Commission told the paper that Margrethe Vestager, the European Union’s competition chief, is finalising her ruling on the long-runing case.

Chip maker Intel incurred the largest penalty yet imposed by the EU when it was fined just over €1bn in 2009 for market abuse violations, but Google is set to be fined even more according to the report.

Google, owned by Alphabet Inc (NASDAQ:GOOGL), is being investigated by the EU’s executive arm on claims it diverted traffic from competitors’ rival services to favour its own comparison shopping site.

The EU has also launched two separate investigations involving Android, the company’s mobile software, and some of Google’s advertising products.

Noon... FTSE 100 recovers nicely; Goldman shuffles its airline arrangements

Goldmans Sachs has changed seats in its airline coverage with Ryanair PLC (LON:RYA)  the main beneficiary as the US broker prefers the low cost operators over flag carriers.

The Irish outfit gets an upgrade to ‘buy’ from ‘neutral’ with a new target of €22 with Wizzair PLC (LON:WIZZ) also a buy as the two are seen as potential winners from the demise of legacy airlines.

British Airways and Iberia owner IAG PLC (LON:IAG) is downgraded to neutral with a new price target of 645p.

IAG rose 0.5% to 587p, Ryanair 0.2% to €18.21 and Wizzair 1.5% to 2,311p.

11.00am ...FTSE 100 rebounds as mood improves

London’s blue chips are enjoying a much better day after the retail-inspired beating yesterday.

FTSE 100 is up 47 at 7,467, with Rolls-Royce leading the way after a decent trading update this morning.

The aeroengine maker said expectations for revenue, profit and free cash flow remain unchanged both for the half year and full year from those given in February.

While not a great update, it was not another profit warning and the shares were marked up 2% to 913p.

Tesco PLC (LON:TSCO ) was a laggard even though quarterly sales were better than expected.

Group like-for-like sales rose 1.0% in the 13 weeks to 27 May, as growth in its core UK division offset a decline in its international business following the decision to discontinue unprofitable bulk selling in Thailand.

UK like-for-like sales increased 2.3%, driven by a 2.7% gain in food. Analysts had expected an increase of 2.2% in the first quarter following a 0.7% rise in the fourth quarter.

“Volume growth of just 1.3% during the period suggests that inflation was part of the driver of sales growth. However, the retail giant did state that it is working with its suppliers to limit price growth to the consumer,” said Helal Miah at the Share Centre.
Tesco.

After strong early gains, shares in the supermarket chain were 0.5% lower at 179.05p.

8.40am ...FTSE 100 seen recoups some of its lost ground; satellite group Avanti reaches for the stars

The FTSE 100 recouped some of Thursday’s losses caused by a wobble over UK interest rates as it opened 22.5 points better at 7,441.86.

After a slew of UK data this week, most of it discouraging, eyes will be focused on the US and specifically the housing starts and consumer sentiment numbers.

On the markets, the big news of the day came from grocer Tesco (LON:Tesco) whose better-than-expected current trading was treated a little sceptically by the market, which pushed the shares ahead less than 1% in early deals.

The figures were as much a boost to rival Morrisons (LON:MRW), which also advanced 1%.

Among the small-caps, the satellite communications group Avanti (LON:AVN) reached for the stars after unveiling a US$100mln re-financing. The shares rocketed 53% on the back of the news

 

Proactive news headlines...

Sirius Minerals PLC (LON:SXX), which is developing a huge potash mine in North Yorkshire, UK, revealed that more of its stage one financing convertible bonds have been exchanged for shares. The bonds were announced last November and issued at US$200,000 each to raise a massive US$400mln as part of the financing for the project - believed to be the world's largest high-grade known deposit of polyhalite - used as a fertiliser.

Internet of Things enabler Telit Communications Plc (LON:TCM)  revealed it had received a first order for its LTE Cat 6 connectivity device from an emerging American car parts maker. The device will be shipped in the autumn and be fitted in cars along with other technology, increasingly seen in modern vehicles.

Bloomsbury Publishing Plc (LON:BMY) has appointed Sir Richard Lambert as the company’s new non-executive chairman. Lambert, who was the editor of the Financial Times for a decade, is taking over the role from Sir Anthony Salz and in accordance with Bloomsbury’s policy he will have a term of four years.

Greka Drilling Limited (LON:GDL) has received a letter of award (LOA) for a three year, 73-well drilling programme from India’s Oil & Natural Gas Corporation Limited (ONGC). State-owned, ONGC is the largest oil and gas exploration and production company in India and will use Greka to explore the Bokaro coal bed methane (CBM) prospect. Greka was earmarked for the work in April, but with the LOA should start to mobilise within 90 days though it is still subject to a full contract and performance bond.

Cancer treatment pioneer Nanobiotix SA (EPN:NANO) has presented new data illustrating how its lead treatment, NBTXR3, can help the body’s immune system fight tumours.

In a presentation to an Immunotherapy workshop co-sponsored by the American Society of Radiation Oncology (ASTRO), the National Cancer Institute (NCI) and the Society for Immunotherapy of Cancer (SITC), Nanonbiotix highlighted new data that suggests NBTXR3 generates immunogenic cell death, which could trigger a specific immune response to attack a tumour. 

The pharma services and drug developer Ergomed Plc (LON:ERGO) has appointed a new chief executive. He is Dr Dan Weng, who joins on July 1 from EPS Holdings, a Tokyo-listed contract research business, and will take the reins from the company’s founder, Dr Miroslav Reljanovic, who will become executive vice-chairman.

Falcon Media House (LON:FAL) has appointed tech and media finance specialist Diane McGrath to its newly created position of Global Chief Strategy Officer. Recently listed on AIM, Falcon Media  specialises in “over the top” or OTT media services  - often referred to as “red button video streaming -  and has developed Q-Flow technology to prevent the frequent loss of signal or 'buffering' that  affects video streaming.

Premier African Minerals Limited (LON:PREM) shares rose 5% in early deals on the back of highly encouraging initial testing on material from the group's Zulu Lithium and Tantalum project in Zimbabwe, which underscored the property's big potential. The findings from German based Dorfner Anzaplan showed that a commercial grade, high quality lithium mineral concentrate could be produced.

Shares in software group BOS GLOBAL Holdings Limited (LON:BOS) advanced as it brought in £380,000 in cash from selling  a non-core 75% stake in Australia based metals miner Copper Range (SA) Pty Ltd. The BOS software is focused on making workplaces more productive and it launched the BOS360 work patterns platform in May.

Savannah Resources Plc (LON:SAV) has received initial approval for a waste storage facility at its Block 4 and 5 copper projects in Oman utilising an old mine pit from the adjacent Lasail West mine. David Archer, Savannah’s chief executive, said Oman’s Ministry of Environment and Climate Affairs (MECA) had asked for further studies and test work but it had been given the green light in principle.

PowerHouse Energy Group PLC said it is on the cusp of redefining the waste-to-energy industry with its breakthrough Distributed Modular Gasification (DMG) technology. Its ultra-high temperature system transforms rubbish into electricity with no toxic by-products and effectively zero greenhouse gases.

 

6.45am...cautiously optimistic 

The  FTSE 100 index is expected to make a cautiously positive start today, recovering after yesterday’s sell-off thanks to a firmer showing overnight in Asia.

Spread betting firm CMC Markets expects the UK blue chip index to open around 15 points higher at 7,434, having dropped 55 points yesterday on political, Brexit, and UK rate hike uncertainties.

On currency markets, after a rally yesterday on raised Bank of England interest rate hike possibilities, overnight the pound was up 0.1% against the dollar at US$1.2769, and ahead 0.2% versus the euro at €1.1459.

US stocks ended modestly lower overnight after Wednesday’s rate hike by the Federal Reserve as a sell-off in the tech sector continued, with the Dow Jones closing off 14 points at 21,359.

But Asian shares managed to find some gains today as the Bank of Japan once again held its monetary policy steady, no surprise given a recent cut to first-quarter growth estimates and stubbornly low inflation in the country.

The big flow of UK data seen this week - including inflation, unemployment and retail sales - dries up today, so the main focus will be on the latest US housing starts and consumer sentiment numbers this afternoon, particularly in the wake of Wednesday’s interest rate hike by the US Federal Reserve.

Tesco update the main event

After a fairly quiet week for corporate news, the main event finally arrives today with a first-quarter trading update scheduled from UK retail giant Tesco PLC (LON:TSCO).

It’s been a troubling few years for the FTSE 100-listed group with price wars, failed expansion plans and, of course, an accounting scandal weighing heavily on the supermarket giant.

But there have been better signs more recently, with Tesco’s full-year results in April showing encouraging hints of a recovery in the UK and that revival is expected to have continued into the first quarter of 2017.

READ: Tesco slumps despite better-than-expected results

According to the latest Kantar WorldPanel data till roll data, Tesco saw its sales rise by 1.8% in the 12 weeks to 21 May, albeit with all of the ‘Big Four’ boosted by rising food prices.

That’s not too far from the estimates of UBS, with the Swiss bank expecting total group like-for-like sales growth of 1.7% for the three months ended March.

Aside from Tesco, the only other trading news scheduled for Friday is from small cap staffing firm SThree PLC (LON:STHR) which should provide a snapshot of the impact of Brexit fears and the recent UK general election on the UK recruitment market.

Significant announcements due on Friday June 16:

Trading updates: Tesco PLC (LON:TSCO), SThree PLC (LON:STHR)

Finals: Record PLC (LON:REC)

Around the markets:

  • Sterling: US$1.2769, up 0.1%
  • Gold: US$1,251.50 an ounce, down 70 cents
  • Brent crude: US$44.48 a barrel, up 2 cents

City Headlines:

  • BHP Billiton chooses Ken MacKenzie as new chairman – Financial Times
  • RBS gets investment-grade rating from Moody’s – Financial Times
  • BAE sold surveillance tech to Saudis that could be used against UK – The Independent
  • Firstgroup chief loses bonus after tram crash – The Times
  • Next slice of Domino’s could cost £330mln in planned London float – Daily Telegraph
  • Anger as tycoon snatches back tech firm Fusionex from investors as its value plunges £116mln – Daily Mail
  • UK car insurers lost £3.5bn in 2016 due to new compensation rules – The Independent
  • London’s Gherkin gets £1 billion price tag – The Times
  • Verizon to take $500 million charge in connection with Yahoo deal – Financial Times
  • South Africa miners and rand hit by black ownership rule change – The Times
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