By This Is Money Reporters
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5.30pm (CLOSE): Marks & Spencer’s investors headed for the check-out today amid fears that the retailer will emerge as one of the sector’s losers from the festive season.
Sainsbury’s shares also slipped on the possibility that it could suffer its first like-for-like sales fall in more than nine years.
Overall, the FTSE 100 Index was flat as traders kept their powder dry ahead of corporate news later in the week, closing just 0.1 point up at 6730.7.
Tough times: Investors are anticipating losses for Marks and Spencer following tough trading in the festive season.
Germany’s Dax was also flat while France’s Cac 40 fell amid data indicating continued underperformance in its services sector. In New York, lacklustre US economic data saw the Dow Jones Industrial Average in the red too.
On currency markets, sterling was flat at 1.64 US dollars and 1.20 euros.
In London, equities were held back by weaker mining stocks as Fresnillo dipped 36p to 735.5p, Antofagasta dropped 34p to 787p and Randgold Resources was 138p off at 3786p, with Rio Tinto sliding 104p to 3266p.
The top-flight risers’ board was led by RSA Insurance, which jumped 6 per cent on hopes that it will soon be able to draw a line under the accounting issues that have blighted its Irish business in recent weeks.
According to weekend reports, an independent review by PwC into the 200million blackhole at RSA’s Irish operation is expected to conclude on Thursday that no further write-downs will be needed in the business.
Shares in the More Than owner, which is currently without a chief executive following the resignation of Simon Lee last month, leapt 5.8p to 97.9p.
Confidence in the firm was also helped by a note from UBS reiterating a buy rating and raising the company’s target price to 113p.
Travel stocks also did well, with British Airways owner International Airlines Group up 6.2p to 414p and easyJet 32p stronger at 1597p. Both companies doubled in value during 2013 as conditions in the sector showed signs of stabilising.
In the retail sector, shares in supermarket chain Tesco enjoyed a positive session, up 1.7p to 332.2p ahead of trading figures on Thursday which are sure to be another key test for chief executive Philip Clarke’s 1billion turnaround plan.
In contrast, M&S shares declined 3.7p to 440.3p after the Sunday Times speculated that clothing and homewares sales dropped by up to 1.5 per cent over the festive trading quarter, in spite of discounts of up to 30%.
Even takings from the food department, which has performed strongly amid the woes of the fashion division, may fail to provide cheer. Credit Suisse predicts like-for-like growth for the period will have slipped to 1.5 per cent, from 2.5 per cent in the second quarter.
Meanwhile, Sainsbury’s, which publishes third quarter figures on Wednesday, is expected to lose its record for underlying sales increases, with analysts pencilling in a decline after 35 quarters of growth in a row. Shares slipped 6.2p to 367.8p.
The biggest FTSE 100 risers were RSA, up 5.8p to 97.9p, Hargreaves Lansdown up 50p to 1491p, Persimmon up 31p to 1290p and easyJet up 32p to 1597p.
The biggest FTSE 100 fallers were Fresnillo down 36p to 735.5p, Antofagasta down 34p to 787p, Randgold Resources down 138p to 3786p and Rio Tinto down 104p to 3266p.
3.40 pm: The Footsie maintained its modest gains in mid-afternoon trade, helped by an early advance on Wall Street as traders mulled a mixed batch of US data which failed to dent optimism over the improving economy.
The FTSE 100 index was 12.5 points higher at 6,744.4, extending Friday’s rally at the start of the new year following strong gains in 2013.
It was a similar picture in New York, with the Dow Jones Industrial Average up 28.6 points at 16,469.9 in the first hour of trade.
Gains maintained: An early advance on Wall Street helped the FTSE 100 index maintain its modest gains.
The pace of growth in the US services sector slowed for a second straight month in December with business activity expanding at a lower rate and new orders contracting, according to an industry report released today.
The Institute for Supply Management said its services index fell to 53 last month from 53.9 in November. The reading was below expectations for a reading of 54.5, and was the lowest reading for the index since June 2013.
But orders for US factory goods rebounded in November, adding to signs of strong momentum in the economy in late 2013. The Commerce Department said on new orders for manufactured goods increased 1.8 per cent in November, while October’s orders were revised to show a 0.5 per cent drop instead of the previously reported 0.9 per cent fall.
Max Cohen, financial sales trader at Spreadex said: ‘Ever since the turn of the year, market participants have been speculating whether or not equities can continue with their incredible run after all major indices added significant gains in 2013.’
‘One significant statistic to bear in mind is that American stocks have never retreated after gains were as substantial in the past as they were in 2013.’
However Cohen added: ‘Whilst analysts seem to agree that the valuation of equities is by no means overvalued, there seems to be a conflict regarding whether or not the market has accounted for improving earnings.’
In spite of the Footsie’s gains, retailers were under pressure today led by Marks & Spencer on worries over an impending Christmas trading update. M&S shares shed 4p at 440p.
Falls by miners also remained a drag on sentiment in London but precious metals firm Centamin bucked the trend as it reported total production of 356,943 ounces of gold for 2013, above October’s guidance of 320,000 ounces.
Centamin, which is in dispute with the Egyptian government amid political upheaval in the country about its right to mine at the Sukari site in the country, saw its shares rise 2.1p to 47.3p on the news.
In reaction, broker Peel Hunt raised its target price for Centamin to 58p from 56p.
Peel Hunt analyst Maurice Mason said: ‘With no debt, no hedge and with third quarter cash, bullion on hand and gold sales receivables of $ 156million, Centamin’s balance sheet remains extremely healthy.’
Contractor Balfour Beatty was also a good riser, adding 2.2p at 292.5p on news it has won a 154million contract to carry out the transformation of London’s Olympic Stadium into a multi-use venue.
The site is due to host five matches during the Rugby World Cup in 2015 and will be the permanent home of West Ham Football Club from 2016.
Last summer Balfour was awarded the contract to convert the stadium roof and will now lead the remainder of the transformation works after winning the contract from E20 Stadium Partnership, which is a joint venture between the London Legacy Development Corporation and Newham Council.
1.10 pm: A big week for retail trading updates started with another shares slip for Marks & Spencer today as fears mount over its festive performance, with weak retailers a drag on the Footsie at lunchtime.
Sainsbury’s was also lower on the possibility that it could suffer its first like-for-like sales fall in over nine years, although overall the FTSE 100 Index was modestly higher, up 3.3 points at 6,733.9.
M&S shares shed 4.9p p to 439.6p after press reports suggested that its clothing and homewares sales dropped by up to 1.5 per cent over the festive trading quarter, in spite of discounts of up to 30 per cent.
FTSE flat: The UK blue chip index was barely moving at lunchtime weighed down by falls in retailers and mining stocks.
Citigroup today cut its price target for M&S to 510p from 575p although it maintained its buy rating on the stock.
Meanwhile, Sainsbury’s, which publishes third quarter figures on Wednesday, is expected to lose its lengthy record for underlying sales increases, with analysts pencilling in its first decline after 35 quarters of growth in a row. Sainsbury’s shares slipped 2.0p to 372.0p.
But fellow supermarket chain Tesco held steady at 330.5p ahead of trading figures on Thursday which are sure to be another key test for chief executive Philip Clarke’s 1billion turnaround plan.
Away from the retailers, weaker mining stocks also held back progress for the blue chips hit by fresh signs of economic weakness in top metals consumer China, with Rio Tinto down 50.0p to 3,320.0p and Anglo American losing 21.5p to 1,275.5p.
‘China is slowing down, particularly on the construction and manufacturing side, and that could have a negative impact on the commodity space as China is a huge driver of commodities demand,’ Macquarie strategist Daniel McCormack said.
‘If we do see a major slowdown in the country, then it would be difficult for the mining sector to do well. But that’s not my base case as a major slowdown in China is quite unlikely,’ he added.
But on the upside, travel stocks were doing well, with British Airways owner International Airlines Group up 7.4p to 415.4p and easyJet 25p stronger at 1,590p.
Both airlines’ share prices doubled in value during 2013 as conditions in the sector showed signs of stabilising.
RSA Insurance jumped 6.6p to 98.7p.on hopes that it will soon be able to draw a line under the accounting issues that have blighted its Irish business in recent weeks.
Confidence in the More Than owner was also helped by a note from UBS reiterating a buy rating and raising the company’s target price to 113p.
And broker comment helped energy services group Petrofac climb 16p to 1,237p after Deutsche Bank moved its rating to buy from hold.
Petrofac’s shares slumped in November after it warned of little or no growth due to increased competition and contract delays.
09.55 am: London leading shares moved lower as the morning session progressed, with weakness in heavyweight miners and retailer Marks & Spencer weighing on the blue chips at the start of the first full trading week of 2014.
After nearly two hours of trading, the FTSE 100 index was down 4.7 points at 6,725.9, continuing a jittery start to the new year.
Miners were the main blue chip casualties hit by fresh signs of economic weakness in top metals consumer China. Surveys showed growth in the Chinese service sector activity slowing in December, mirroring the trend seen in manufacturing.
M&S worry: Shares in the high street retailer fell on concerns an impending Christmas trading update will disappoint
Craig Erlam, market analyst at Alpari UK said: ‘This number still represents growth in the industry so it isn’t worth worrying about at this stage. However, it could be an early warning sign that, as in 2013, China is going to struggle to maintain these high levels of growth.’
Among the weak miners, Rio Tinto shed at 28.5p at 3,341.5p, and Randgold Resources fell 70.0p to 3,854.0p.
Meanwhile there was mixed news on growth in Britain’s services sector which slowed unexpectedly in December, although confidence rose and the economy still looks likely to have recorded its strongest expansion since 2007 last year, a survey showed.
The monthly services purchasing managers’ index (PMI), compiled by data company Markit, fell to a six-month low of 58.8 in December, rather than holding at November’s level of 60.0 as economists polled had forecast.
Back with the blue chips, falls by retailers was a drag with Marks & Spencer the worst off, down 7.8p to 436.2 pence on concerns that a trading update due on Thursday may reveal weak Christmas sales.
But it wasn’t all doom and gloom on the high street, as supermarket chain Tesco climbed 1.6p to 332.1p ahead of its own trading update also due Thursday.
Among other gainers, insurer RSA rose after the Sunday Telegraph reported that a probe into its Irish business was expected to conclude that accounting problems there were an isolated incident, and that no further writedowns will be needed. Results from the probe by accountants PWC are due on Thursday, January 9.
‘There are people out there that were extrapolating from, Ireland which is 3 per cent of the group’s business, to some of the bigger regions, and if the PWC reviews includes the words isolated incident …. then for those people it would be a good respite for them,’ said Eamonn Flanagan, insurance analyst at Shore Capital.
Traders said RSA was also helped by a positive note from UBS raising its price target on the stock and adding it to the bank’s most preferred list.
Shares in the More Than owner, which is currently without a chief executive following the resignation of Simon Lee last month, jumped 5.6p to 98.0p.
8.25 am: The Footsie was barely changed in early deals on Monday as the new year continued in the uncertain path seen last week, with traders slowly returning to their desks after the festive period.
The FTSE 100 index was up 4.5 points at 6,735.2 in opening trade, giving back some of the previous session’s modest gains, having closed 12.76 points higher on Friday.
‘The first full trading week of 2014 looks likely to take its cues from the end of last week after the strong gains seen in December saw some significant volatility as investors weighed up last week’s better than expected economic data out of Europe, which appeared to show a continued recovery in economic activity across the region, albeit with some worrying exceptions,’ said Michael Hewson, chief market analyst at CMC Markets UK.
Slow start: Traders saw a slow start to on the first full dealing week of 2014
‘This volatility could well continue as returning investors weigh up whether last month’s gains have been priced into the improvement in the data, or whether now could be the time to take some profit as the pre-seasonal exuberance of investors over the Fed’s $ 10billion taper, gives way to a post seasonal hangover as investors take steps to shed some of the excess trimmings, ahead of this week’s latest US jobs numbers.’
Asian shares fell to a three-week low on Monday after growth in China’s services sector slowed sharply last month, raising concerns about the pace of recovery in the world’s second-largest economy.
China’s HSBC/Markit Economics services Purchasing Managers’ Index (PMI) dropped to 50.9 in December, its lowest since August 2011, from 52.5 in November.
In the UK, December Markit services PMI numbers will be released at 9.30 am, giving a snapshot of the mood of British purchasing managers.
The British economy will be also in focus as finance minister George Osborne will on Monday reinforce his plans for lower spending to allow for the possibility of tax cuts as the Conservative-led government tries to seize the initiative in a pre-election year.with the finance chiefs of Britain’s biggest companies say their appetite for risk has returned, with a poll showing they believe access to bank lending will ease in 2014, enabling them to expand and hire more staff.
Stocks to watch include:
MARKS & SPENCER – UK media highlights the scope for disappointing results from the retailer, which is due to give a trading update on Jan. 9. Britain’s biggest clothing retailer is expected to report weak Christmas trading, adding to pressure on management to end a run of poor results.