FTSE 100 gains thanks to Tesco
FTSE 250 gains thanks to Booker
Pound fell 0.4% against the US dollar to $1.2541
Pound dropped 0.6% against the euro to 1.1729 euros
FTSE 100 shares edged higher on Friday, helped by a jump by supermarket Tesco (LON:TSCO).
The blue-chip index closed up 0.3% at 7184 – down 14 points on the week - and was led by Tesco, which gained 9.3% to 206.55p after it surprised the City when it agreed to buy food wholesaler Booker Group, owner of the cash-and-carry Makro UK chain.
Tesco’s offer was £3.7bn, which will result in Booker shareholders holding 16% of the combined company.
The FTSE 250 midcaps gained 0.3% to 18,190 – 40 points up on the week - and was led by Booker Group (LON:BOK) on the Tesco deal, up 16% to 212.3p.
BT (LON:BT.A) showed some robustness as its shares gained 1.1% to 305.49p after the telecoms firm reported a sharp fall in third-quarter profits, down 37%, as it comes to terms with its Italian accounting scandal.
The company also confirmed that Corrado Sciolla, head of continental European operations, would step down over the affair.
The FTSE AIM 100 Index put in a solid performance, rising 0.9% to 4206 while the FTSE AIM All-Share Index rose 0.6% to 881.
London stocks which gained were 32% of the overall bourse, while losers were 31%.
1600 GMT - FTSE 100 faltering as it approaches the finish line
FTSE 100 up 10 points at 7,171
Fresnillo rises after Citi lifts price target - but it is still a sell
Tesco and Booker shares surge on merger
Goldman abandons bullish view on easyJet
Having struggled back into the blue in the afternoon session the FTSE 100 was tailing off towards the end of the session.
The top-share index was 10 points to the good at 7,171 at about 3.45p, with supermarket giAnt Tesco PLC (LON:TSCO) leading the way, after its blockbuster bid for FTSE 250 food wholesaler Booker Group PLC (LON:TSCO).
Tesco shares were up 9.5%.
A price target increase by Citi from 1,100p to 1,225p for precious metals miner Fresnillo PLC (LON:FRES) pumped up the share price 50p to 1,422p.
Citi still rates the shares a 'sell', however.
Brokers were queuing up to downgrade no-frills airline easyJet (LON:EZJ).
The downgrade to 'neutral' from 'buy' by Goldman Sachs probably had more impact than Irish broker Davy Research downgrading the stock to 'under-perform' from 'neutral'.
The shares were the Footsie's worst performers, sliding 2.3%.
2.00pm ... FTSE 100 up seven points
London’s blue chips were going nowhere fast despite Tesco and Booker’s merger and an attempt by BT’s boss to distance himself from his Italian problem.
The FTSE 100 index was up about 7 points at 7,168, having recovered from an earlier low of around 7,150.
Tesco shares topped the FTSE 100 leaderboard, adding over 11% at 209.9p as analysts and investors decided this was a sign that the supermarket had recovered its mojo after the traumas of recent years.
“The combined group will be a powerful combination, given improved buying power and reach in retail and food service, and giving opportunities to improve distribution efficiencies and customer service,” declared broker Peel Hunt, pretty much echoing the Tesco/Booker party line.
There remains the matter of regulatory approval and conceivably another bidder may emerge.
That was what the market was saying as Booker (LON:BOK) shares were nudging above the bid price, but that might just reflect the surge in Tesco.
BT Group (LON:BT.A) managed to edge higher though its third quarter statement was pretty much a sideshow after the shocker from Italy earlier in the week.
Gavin Patterson, BT’s chief executive, admitted investors were angry but said he would not be standing down over the financial irregularities uncovered in Italy that so far have cost it £530mln.
One employee that is leaving is head of continental Europe, Corrado Sciolla, but analysts suggest the buck may not stop there if things get much worse in Italy.
Shares rose 1.5% to 307p.
Elsewhere, there was a quiet drawing of a line under one of the most bitter battles the sedate world of investment trusts has yet seen as Alliance Trust (LON:ATST) agreed to buy back the 19.5% stake of activist investor Elliot International.
It marks pretty much a complete victory for the US group, which over the course of five years has managed to overhaul the board and the investment trust’s investing policies and is now walking away with a fairly meaty profit.
Alliance shares rose slightly to 652p having almost doubled since Elliot first came on board in 2010.
Among the small caps, factory automation specialist Ubisense Group Plc (LON:UBI) accelerated away after a confident trading update.
Revenue growth, margins, cost management and the order book are all significAntly better than 2015’s numbers, it reported.
Shares added 31% to 49p.
10.30am ... Small gains ...
The Footsie ticked higher in mid morning trading, but largely remained close to where it started the day as investors await data showing the first reading for US fourth-quarter growth later and the first meeting of Theresa May and Donald Trump.
Around 10.30am, the FTSE 100 index was up about 3 points at 7,165, having recovered from an earlier low of around 7,150.
Chris Beauchamp, chief market analyst at IG said: “Equity markets continue to stumble, with a continuing rise in the US dollar hitting European assets."
He added: “For the FTSE 100 it has been an unrewarding few days, with a failure to break above 7200 an indication of how weak risk appetite is.”
But, the analyst noted: “Fortunately we have Tesco and Booker to distract us, with the deal proving that Dave Lewis’s firm remains the sector titan before which all others pale in comparison.“
“The regulator is bound to take an interest, with store disposals likely, but this is just the kind of news to finally reverse the serial underperformance in Tesco shares, which have suffered far more than Sainsbury’s or Morrisons over the past few years.”
Tesco shares topped the FTSE 100 leader, adding over 8% at 204.7p, while Booker was the biggest FTSE 250 gainer, jumping almost 16% higher to 212p.
8.30am ... Every little helps ...
The FTSE 100 was subdued in early trade, though it edged into positive territory ahead of Prime Minister Theresa May’s visit to Philadelphia to meet President Donald Trump.
The index of blue-chip shares nudged 4 points higher to 7,165.55 in the first half hour of trading.
The big movement came from Tesco PLC (LON:TSCO), which made a somewhat leftfield bid for Booker Group PLC (LON:BOK), which values the cash and carry business at £3.7bn.
The City appeared to like the deal as shares in the UK’s largest grocer were market up 7%. Booker’s, meanwhile, soared 14%.
"The Tesco of old is back,” said John Ibbotson of Retail Vision.
“This is an extremely bold move and demonstrates an intent and sense of purpose that have been missing for the best part of a decade.
"It also represents the official end of the global dream. For Tesco, the jewel in the crown is once again the UK.
"With the acquisition of Booker, which owns Budgens and Londis, Tesco has shown its hand. Its competitors, in particular the discounters, now know they’re in a fight.
"The message is unequivocal: the UK grocery sector, both retail and wholesale, is ours and we are taking it back.”
BT Group PLC (LON:BT.A) shares were left treading water after it unveiled its third-quarter results – the real news came earlier in the week as the scale of its Italian accounting woes were revealed.
7.00am ... FTSE 100 expected to start lower ...
The FTSE 100 is expected to start around 5 points lower this morning at the end of the first week of Donald Trump’s US presidency, consolidating with Asian markets even though US stocks hit fresh record highs.
Overnight on Wall Street, all three major US indices hit life-time intraday highs, with the Dow Jones rising 0.2% to also set a record close after breaching 20,000 on Wednesday.
Asian shares were steady on Friday in holiday-thinned trade but were on track for a solid advance this week.
Michael Hewson, chief market analyst at CMC Markets UK, said: “While we once again saw record highs in US stock markets yesterday we also saw a little pause for breath, and a mixed finish ahead of what has been another record breaking week for US stock markets.”
He added: “What has been notable has been the turnaround in bond markets, which have started to resume their downward path once more, as concerns about higher inflation forced yields back up again, in the wake of this week’s executive orders from US President Donald Trump.”
On the corporate news front, investors will be hoping BT can provide some reassurance with third-quarter numbers today after the telecoms giAnt’s share price debacle on Tuesday in the wake of news accounting issues at its Italian unit were much worse than initially feared.
BT lost almost £8bn, or more than a fifth of its stock market value on Tuesday as its share price plunged by 21% - its worst-ever one-day fall – after the FTSE 100-listed firm more than trebled an estimated write-down on its Italian business to around £530mln, up from its £145mln initial forecast made in October.
BT also spooked investors with some cautious trading comments, saying “the outlook for UK public sector and international corporate markets has deteriorated”.
Ahead of this week’s bad news, analysts at Barclays Capital were looking for continued signs of recovery in BT’s broadband market growth and expected recently-acquired mobiles operator EE to show resilience.
In a preview note to clients at the start of the week, Barclays forecast a small rise in BT’s third quarter revenues to £6.09bn up 0.8% from the same stage a year earlier, with underlying earnings (EBITDA) declining by 4.7% to £1.95bn.
Around the markets
- Sterling: US$1.2540, up 0.37%
- Gold: US$1,189.50 an ounce, flat
- Brent crude: US$53.76 a barrel, down 0.04%
City Headlines
- BT to bring forward auditor review in wake of Italian scandal – Financial Times
- Chancellor Philip Hammond defers sale of stake in RBS – The Times
- Verizon eyes $300 billion Charter merger to create telecoms monster – The Times
- Unilever Boss says Britons should ‘get used to’ price rises – The Independent
- Co-op Bank warns it will miss capital target - Telegraph
- China’s Ant Financial buys MoneyGram for $880 million – Financial Times