Stock market report: Friday close
Supermarkets may have been a relatively safe haven for investors during the market turbulence, but sector titan Tesco may be unable to deliver the goods next week.
Movers: Latest share prices
That is the verdict of Société Générale, which today said Tesco remains off its shopping list, with a price target of just 234p. In a note titled 'It takes a while to think the unthinkable', published ahead of the supermarket chain's third-quarter figures on Tuesday, the City big gun predicts like-for-like sales growth in the UK of just 1.3%.
Analysts say the recently launched discount range will have eaten into growth and this, paired with the easing of price pressures in the food sector, raises the possibility of a sales drop in 2009.
SocGen's was the most bearish note, but other brokers were jumping on the bandwagon. Broker ING warned that shareholders should be braced for disappointing results. Its analysts still expect sales to rise 2.5% for the period, but this compares unfavourably with recent results from rival J Sainsbury, 1p dearer at 287p, which reported a 4.3% jump in sales last month.
Tesco forecasts sales growth of 3.4% for 2009, but ING says this may prove over-optimistic given the weakness in the UK's non-food retail sector and the fact the company is losing market share. Reiterating a hold rating, ING puts a price target of 370p on the shares.
The negative broker sentiment, fuelled by later rumours of a possible profits warning, sent Tesco's shares plunging 6.3p to 295.3p, close to four-year lows.
The FTSE 100 yo-yoed between the red and the black in a directionless market, settling 44.5 points higher at 4270.6 in thin trading. A poor performance from the mining sector dragged on the benchmark index, as investors pocketed profits and chewed over the gloomy outlook for metal prices.
Miners accounted for the three biggest fallers in the top flight, with Lonmin diving 61p to 852p, Antofagasta 30p lower at 432p and Kazakhmys off 9¼p at 259¾p.
In New York after this afternoon, volumes were likewise light, with the markets only open for half a day. The Dow dipped 4.93 points to 8721.68.
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Struggling housebuilder Taylor Wimpey was one of the Footsie 250's biggest winners, adding to yesterday's gains with a rise of 1p to 11p as over 58m shares changed hands.
The Bryant Homes and George Wimpey owner, which is in survival talks with its bankers, was boosted by continued speculation about a debt-for-equity swap.
Its shares dived to a record low of 4¼p on Tuesday after its former biggest investor Axa sold the majority of its stake. Some dealers were quick to dismiss the gains, attributing it to a short squeeze.
News that BSkyB will carry on fighting a ruling that it must reduce its 17.9% stake in ITV explained the wildly contrasting fates of the two broadcasters. BSkyB climbed 25¼p to 439½p in response, but renewed uncertainty over the holding left ITV among the biggest mid-tier losers, 2¼p lower at 35½p. Media analysts say that while the appeal is no surprise, if Sky emerges victorious, it could send ITV's shares plunging to fresh lows.
Yesterday, shares in the terrestrial broadcaster surged 18% after a leaked memo revealed plans to slash costs again, but brokers gave a lukewarm reception to the news.
UBS said that despite factoring in the additional £30m of cost savings, it still thinks the shares look overvalued, and gives ITV a target price of just 25p.
Investors may not want to step anywhere near Topps Tiles, with its shares losing over two-thirds of their value in the past six months, but one of its founders showed his faith in the tiles and flooring chain. Barry Bester bought 100,000 shares at 17p a pop, topping up his holding to 11.7% of the group and sending Topps surging 4½p to 24½p.
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Monday's agenda
Activity in the manufacturing sector shrank for the sixth month in a row in October. IHS Global insight's Howard Archer expects the chartered institute of Purchasing and Supply to report a further decline, with a reading of 40 for its headline PMI figure, where 50 marks the cut-off between expansion and contraction.
Fund manager Aberdeen Asset Management delivers preliminary results, revealing whether cost-cutting has helped it to weather turbulence. Mitsubishi UFJ Trust last month took a 10% stake in the group as part of a strategic alliance in which the Japanese lender will promote Aberdeen's products in its home market.
House prices have lost 7.3% in the past year according to last month's survey from Hometrack, the biggest drop since its records began. The property consultant's November report is expected to show prices falling again, although less than the 1.3% the previous month.
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