Sainsbury’s unsuccessful swoop for Home Retail Group dominates trading day

Published: Tuesday 5th January 2016 by The News Editor

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Trading on the London market was dominated by Sainsbury’s bid approach for £1 billion-rated Argos owner Home Retail Group.

Supermarket Sainsbury’s today confirmed its cash and shares approach was rebuffed in November by household goods firm Home Retail, which also owns DIY chain Homebase.

The FTSE 100 Index was 43.8 points lower at 6137.2, after the supermarket said it still believed that a combination would make “an attractive proposition for the customers and shareholders of both companies.”

Yesterday the top flight slumped 2.4%, after markets tumbled in Beijing and amid widening tensions in the Middle East.

Markets in China had been automatically suspended on Monday after shares tumbled nearly 7% following manufacturing data showing that factory output had fallen for the 10th month in a row.

But today trading in London was steadied after China poured 130 billion yuan (£14 billion) into its capital markets overnight to stabilise the country’s financial system and prop up the weakening currency.

Equities across Europe staged modest recoveries, with the Dax in Germany up 0.2% and the Cac 40 in France flat, compared to respective falls of 4.3% and 3% yesterday.

The pound was a cent lower against the US dollar at just over 1.46, after data showing American car sales are expected to reach a record high of 17.5 million in 2015 again confirming the strength of the US economy. Sterling was a cent up against the euro at just over 1.36.

In London, Sainsbury’s was the biggest faller in the top flight, down 5%, or 13.2p to 242.1p, after analyst concerns about the rationale behind the deal as well as its price. But in the FTSE 250 Home Retail jumped 41%, or 40.6 to 139.3p.

Next sparked worries of a dismal Christmas for clothing retailers after it blamed unusually warm weather for a “disappointing” festive sales performance.

The retailer posted a shock 0.5% fall in sales across its 540 stores in the 60 days to December 24, while growth across its Next Directory online and catalogue arm slowed sharply to 2% as its trading woes were compounded by stock shortages and tougher online competition.

It now expects full-year profits to come in towards the bottom end of its forecast, at £817 million, although this would still be a 4.4% hike on the previous year. Shares fell 330p to 6860p.

Marks & Spencer, which reports Christmas trading on Thursday, fell 0.3p to 435p, while Debenhams dropped almost 2% or 1.3p to 71.2p in the FTSE 250.

Tesco was faring better thanks to an upbeat note from Deutsche Bank, which tipped the chain as the best bet in an embattled sector.

Shares in the group, which reports Christmas trading figures next week, rose more than 1% or 2.2p to 144.4p.

The biggest risers in the FTSE 100 Index were Glencore up 3p at 88.3p, Travis Perkins up 56p to 1992p, International Airlines Group up 15p to 611p and Johnson Matthey up 60p at 2660p.

The biggest fallers in the FTSE 100 Index were Sainsbury’s down 13.2p at 242.1p, Next down 330p at 6860p, Aberdeen Asset Management down 6.8p at 275.2p and Standard Chartered down 9.4p at 532.3p.

Published: Tuesday 5th January 2016 by The News Editor

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