London midday: Grocers pummelled after latest update from Sainsbury

The Footsie was declining come midday following the release of weaker than expected survey readings for the manufacturing sector in the Eurozone and UK.

The FTSE 100 was 33 points lower at 6,589 as of 12:18.

Downbeat performances from both US and Asian markets overnight were helping matters little. Traders were also biding their time ahead of the latest manufacturing sector data out Stateside in the afternoon.

The final reading on Markit’s Eurozone manufacturing sector purchasing managers’ index (PMI) showed it slipping to a reading of 50.3 for September, versus forecasts for a print of 50.5.

Likewise, a similar PMI for the UK revealed a further cooling down in the country, led by lower levels of new business and export orders.

In parallel, earlier this morning China's national bureau of statistics released its official manufacturing sector purchasing managers' index, which came in at 51.1 for September, as expected.

The figures prompted economists at Capital Economics to write: "Today's official PMI suggests the while conditions have held up better than many had expected on the back of healthy foreign demand, the cooling continued to weigh on economic activity and import demand.

"[...] the PMIs also show that domestic demand remains subdued and that the cooling property sector continues to be a drag."

Tesco shares act as a drag on the entire sector

In company news, Tesco was notified by the financial regulator that a full investigation has begun into its recent profit overstatement. The Financial Conduct Authority (FCA) notified the FTSE 100 grocer that it will look into its £250m overstatement of expected profit for the half year, alongside the "independent" review by Tesco's accountants Deloitte. Tesco said it will continue to co-operate fully with the FCA and other relevant authorities considering the matter.

Second quarter numbers from Sainsbury were better than expected, with like-for-like sales excluding fuel down by 2.8% as competitive forces in the grocery market accelerated. That was nevertheless better than the 3.5% drop which Shore Capital had pencilled in. Analyst Bryan Roberts at Kantar Retail said the update contained few surprises, but seemed to confirm the retailer, having hitherto been insulated from the discounter chill, "has started ceding shoppers to the more price-led retailers". But a planned strategic review, that CEO Mike Coupe unveiled, left investors fearing the dividend could be cut.

Building merchant Grafton Group has completed the acquisition of Brussels-based Gedimat-Ginion. Grafton said the addition expands and complements its coverage of the Brussels market following the acquisition earlier this year of Mpro.

The news-flow surrounding the mail and parcel delivery sector of late has been quite negative, and merits marking down forecasts for Royal Mail, but the headwinds facing the company are baked into the price already, UBS thinks. Hence, analysts Dominic Edridge and Jarrod Castle have upgraded their view on Royal Mail to ‘neutral’ from ‘sell’ although their price target has been lowered to 400p from 450p.

Market Movers
techMARK 2,807.21 -0.18%
FTSE 100 6,588.92 -0.51%
FTSE 250 15,324.25 -0.36%

FTSE 100 - Risers
Royal Mail (RMG) 405.30p +3.34%
Wolseley (WOS) 3,300.00p +1.79%
Schroders (SDR) 2,419.00p +1.17%
Imperial Tobacco Group (IMT) 2,689.00p +0.94%
Next (NXT) 6,655.00p +0.76%
Carnival (CCL) 2,481.00p +0.69%
G4S (GFS) 252.40p +0.68%
Capita (CPI) 1,170.00p +0.52%
Mondi (MNDI) 1,016.00p +0.49%
Coca-Cola HBC AG (CDI) (CCH) 1,339.00p +0.45%

FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 158.80p -5.64%
Sainsbury (J) (SBRY) 238.90p -5.01%
Tesco (TSCO) 179.40p -3.65%
BG Group (BG.) 1,100.50p -3.46%
Petrofac Ltd. (PFC) 1,007.00p -2.89%
Anglo American (AAL) 1,353.00p -2.24%
Tullow Oil (TLW) 631.00p -2.09%
International Consolidated Airlines Group SA (CDI) (IAG) 359.80p -1.99%
Glencore (GLEN) 336.65p -1.91%
British Land Co (BLND) 689.50p -1.85%

FTSE 250 - Risers
Afren (AFR) 109.50p +5.80%
Countrywide (CWD) 476.50p +5.56%
Mitchells & Butlers (MAB) 366.50p +2.46%
St. Modwen Properties (SMP) 376.00p +2.45%
Spire Healthcare Group (SPI) 295.00p +1.97%
JD Sports Fashion (JD.) 437.40p +1.96%
Synthomer (SYNT) 216.00p +1.89%
Lancashire Holdings Limited (LRE) 651.50p +1.80%
Oxford Instruments (OXIG) 1,038.00p +1.76%
Foxtons Group (FOXT) 218.40p +1.58%

FTSE 250 - Fallers
Ferrexpo (FXPO) 106.80p -4.90%
UBM (UBM) 555.50p -4.72%
Lonmin (LMI) 177.60p -4.41%
Polymetal International (POLY) 497.40p -3.60%
Evraz (EVR) 125.40p -3.54%
Ophir Energy (OPHR) 221.90p -3.23%
Smith (DS) (SMDS) 258.00p -3.12%
Just Retirement Group (JRG) 127.40p -2.82%
Zoopla Property Group (WI) (ZPLA) 230.00p -2.79%
AO World (AO.) 182.90p -2.71%