London open: Stocks slip after strong start, Tesco gains despite weak results

After a brief stint in positive territory, UK stock markets dropped on Wednesday morning as the FTSE 100 came close to a record high, despite a surprisingly positive reaction to Tesco's worse-than-expected annual results.

The FTSE 100, which touched a high of 7,092.34 early on, had dropped 0.58% to 7,021.69 within the opening hour as financial stocks weakened. The index set a new all-time closing high of 7,096.78 last week.

Stocks had started on the front foot after a strong performance overnight in Japan, with the Nikkei benchmark index rising 1.1% to close above 20,000 for the first time in 15 years. Gains came the Japanese trade balance jumped to a surplus of 229.3bn yen (£1.3bn) in March from a deficit of 424.6bn yen previously.

"This is the first trade balance surplus for 12 years, showing strength has returned to the Japanese export market after the onset of a weaker Yen leading up to March," said TradeNext trader Rocky Muddar.

Wednesday's session will be quiet in terms of economic data, with only the Bank of England meeting minutes and US housing figures due for release.

Etoro analyst James Hughes said the BoE minutes "should be a non-event with no change expected in the voting" after members last month voted unanimously to maintain rates.

Tesco and Rolls-Royce rise

Full-year results from Tesco showed a larger-than-expected pre-tax loss of £6.4bn - the biggest in retail history - though the stock was in demand early on. Chief executive Dave Lewis said that the market was "still challenging" though the supermarket did see like-for-like sales trends improving in the fourth quarter.

"Luckily for Lewis, investors still believe in his ability to turn Tesco around, with the supermarket seeing mild gains after the bell," said Spreadex analyst Connor Campbell.

Sector peers Morrisons and Sainsbury's were both trading in the red.

Engine maker Rolls-Royce rose strongly after chief executive John Rishton announced plans to retire this summer. He will be succeeded by former ARM Holdings boss Warren East.

UK timber and builders merchant Travis Perkins also gained after saying group sales were up 7.2% in the first quarter despite strong comparators with last year.

Financials were providing a drag on markets early on with Hargreaves Lansdown, Standard Chartered, Schroders and HSBC among the worst performers. Jefferies was weighing on Hargreaves Lansdown after cutting its rating on the stock to 'hold'.

BHP Billiton was flat after announcing it would postpone some plans to increase an iron ore project. Nevertheless, the company revealed record levels of iron ore and coal production for the nine months of its financial year.

Media group Reed Elsevier declined despite saying in a first-quarter statement that it was confident of delivering "another year of underlying revenue, profit, and earnings growth in 2015".

Market Movers
techMARK 3,235.36 -0.03%
FTSE 100 7,021.69 -0.58%
FTSE 250 17,637.74 -0.42%

FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 1,040.00p +3.28%
Tesco (TSCO) 239.55p +2.04%
Travis Perkins (TPK) 2,060.00p +2.03%
BT Group (BT.A) 462.70p +1.28%
Rio Tinto (RIO) 2,834.00p +0.78%
G4S (GFS) 303.10p +0.63%
Sage Group (SGE) 481.60p +0.61%
Hikma Pharmaceuticals (HIK) 2,107.00p +0.48%
Smith & Nephew (SN.) 1,170.00p +0.34%
3i Group (III) 504.00p +0.30%

FTSE 100 - Fallers
Hargreaves Lansdown (HL.) 1,193.00p -3.32%
Ashtead Group (AHT) 1,127.00p -3.10%
National Grid (NG.) 881.00p -1.77%
GlaxoSmithKline (GSK) 1,549.00p -1.65%
Pearson (PSON) 1,386.00p -1.63%
Burberry Group (BRBY) 1,792.00p -1.59%
SSE (SSE) 1,552.00p -1.52%
Schroders (SDR) 3,283.00p -1.38%
Intu Properties (INTU) 348.50p -1.30%
Standard Chartered (STAN) 1,051.50p -1.27%

FTSE 250 - Risers
Croda International (CRDA) 3,009.00p +3.54%
Playtech (PTEC) 836.50p +2.89%
Infinis Energy (INFI) 187.90p +2.12%
UDG Healthcare Public Limited Company (UDG) 519.00p +1.67%
Fidelity China Special Situations (FCSS) 170.00p +1.49%
COLT Group SA (COLT) 146.30p +1.46%
AO World (AO.) 186.60p +1.41%
Inmarsat (ISAT) 993.50p +1.33%
Ocado Group (OCDO) 351.70p +1.21%
Computacenter (CCC) 682.00p +1.19%

FTSE 250 - Fallers
Cairn Energy (CNE) 172.00p -3.48%
Britvic (BVIC) 726.00p -3.20%
Tate & Lyle (TATE) 624.00p -2.88%
Premier Oil (PMO) 161.70p -2.65%
Amec Foster Wheeler (AMFW) 923.50p -2.17%
Ophir Energy (OPHR) 153.20p -2.11%
Evraz (EVR) 186.40p -2.00%
RPS Group (RPS) 243.90p -1.93%
Ashmore Group (ASHM) 305.60p -1.89%
Tullow Oil (TLW) 391.60p -1.85%