Morning:
8°c
Monday, 28 July - 4pm update
Now we know the reason for the sharp rise in share price of the UK's thirdbiggest supermarkets chain, J Sainsbury, on Friday. Its biggest shareholder, the Qatar Investment Authority, has been out with its shopping trolley and topped up its holding to above 27% of the total number of shares in issue.
It is reckoned to have bought more than 22 million shares, worth £71.4 million, last week for an undisclosed sum, raising its total holding to 476.79 million shares, or 27.27%. Sainsbury shares responded to the news today with a rise of 7½p to 324¾p, and the move is almost certain to generate a fresh bout of takeover speculation.
Only last year, QIA made an indicative offer for 600p a share for the supermarkets chain, but the talks eventually stalled. But that would not prevent the QIA from coming back at any time with a fresh offer.
Elsewhere, share prices made a lacklustre start to the week after gloomy house-price figures from Hometrack, and fresh worries about the banking sector which offset positive earnings news from Reckitt Benckiser, up 62p at 2598p. The FTSE 100 index fell 3.3 to 5349.3 while the broader FTSE 250 index shed 70.1 at 8797.6. In New York this afternoon, share prices made a faltering start, leaving the Dow nursinga loss of 24.5 at 11,346.2. Bank shares suffered a further sell-off following the failure of two small banks in the US at the weekend, ahead of a crucial week for our own High Street clearers that sees several of them unveiling interim results.
Brokers are braced for more bad news with profits set to plunge as the banks themselves face up to further credit crunch writedowns and rising bad-debt provisions leave them nursing-hefty falls on last year's bumper profits. Analysts warn that between them the seven biggest banks will report pre-tax profits of £11.7 billion, down 50% on the corresponding period last year. Lloyds TSB, HBOS and Alliance & Leicester kick off the season this week. HBOS, which saw most of its recent £4 billion rights issue left with the underwriters, is expected to see profits slump from £3 billion to just £1 billion, while Lloyds TSB, which has been relatively unscathed by the fallout from the subprime meltdown, is predicted to produce profits of £1.8 billion, down £200 million on the previous year.
HBOS was the biggest faller among blue-chips today, losing 15¼p to 295p, while Lloyds TSB shed 6¾p at 324½p and Alliance & Leicester dropped 6½p to 340p.
The losses for the Footsie 100 might have been even heavier had it not been for a fresh wave of support among the miners. Antofagasta rose 27p to 531p, Kazakhmys 62p to 1365p and Eurasian Natural Resources 33p to 913p.
UBS has slashed its price target for Rolls-Royce, down 9½p at 361p, from 380p to 300p following first-half results last week. The broker reckons that fears about the civil aerospace cycle will still drive this stock.
The company's earnings face the combined risks of aircraft becoming parked and the aftermarket slowing, a curtailed delivery cycle, and being forced to take provisions for customer financing exposures.
The world's biggest caterer Compass, 2½p off at 342½p, had a few words of cheer for shareholders. It said the third quarter had been strong with profit and margins and revenues, excluding acquisitions, in line with the levels seen in the first half.
Shares in the big pub chains were flat following a report claiming that beer sales were down almost 3% for the year to June. The report from the British Beer and Pub Association said the report highlights the downturn in consumer spending. Mitchells & Butlers fell 24¾p to 240p, Punch taverns 16½p to 253p and JD Wetherspoon 12p to 219¼p, wiping out most of the gains achieved last week on the back of the warmer weather.
