MARKET COMMENT: FTSE 100 Ends Higher, But Supermarkets Suffer

LONDON (Alliance News) - The FTSE 100 ended higher Friday, getting a late lift once the US markets opened having trading in a tight range for most of the day, while supermarkets fell heavily as the price war in the sector intensified once again.

The FTSE 100 outperformed the other UK indices, ending the day up 0.2% at 6,649.39. However, it recorded its biggest weekly loss since June 2013, having fallen sharply on Monday, Tuesday and Thursday. The FTSE 250 closed the day 0.3% lower at 15,383.69 and the AIM All-Share was down 0.3% at 748.95.

European equity markets closed Friday mixed, with the CAC 40 closing up 0.9% but the DAX ended 0.2% lower.

US indices were performing strongly at the close of European trade. The DJIA was trading up 0.3%, the S&P 500 up 0.1% and the Nasdaq Composite up 0.3%.

Supermarkets suffered heavy losses Friday after J Sainsbury pledged lower prices on its branded products, and said it will now only match its 'brand match' scheme with Asda's prices and not Tesco as well. The grocer said it will be lowering base prices on thousands of lines within its food business from October 2, and will match Asda's prices on brands even when those products are on promotion. The move is seen as a fairly aggressive price cutting move given that Asda, owned by US retail giant Wal-Mart, has very deep pockets and is known to be the cheapest of the big four UK supermarkets.

The FTSE 350 food and retailers index suffered its heaviest weekly fall since 2012, declining 13% as the sector continued to slide in the wake of Tuesday's data from Kantar Worldpanel which showed that Sainsbury, Tesco and William Morrison Supermarkets had lost more market share to discounters in the 12 weeks to September 14.

Sainsbury's was the worst-performing stock on the FTSE 100 Friday, declining 3.1%, while Morrison fell 1.8%, and Tesco fell 0.5%.

EasyJet ended the day atop the blue-chip index, its shares gaining 3.2%. Cantor Fitzgerald said the airline will be the main beneficiary of the decision earlier this week by Air France KLM to drop plans to expand its low-cost airline Transavia.

The brokerage noted that France is a key and growing market for easyJet, and it currently has a 14% market share for all passengers and 24% of the business market. Moreover, easyJet has the number one or two positions at eight out of the ten major French airports, and on a number of key routes from Paris it is the only significant competitor to Air France, said Robin Byde, an analyst at Cantor Fitzgerald.

De La Rue was the worst-performing stock in the FTSE 250, its shares declining 34% after the banknote printer warned that its underlying operating and pretax profit for the current year will be GBP20 million lower than the previous year, and it lowered its expectations for next year as a result of deteriorating trading conditions. In 2013/14 the company posted an underlying pretax profit of GBP77.3 million. De La Rue also said that, in light of the difficult trading environment, it intends to "reappraise" the level of its dividend for the full year. It expects to propose an interim dividend of 8.3 pence, down from 14.1 pence a year before.

Economic activity in the US grew faster than previously estimated in the second quarter of 2014, according to the Commerce Department, with the upwardly revised growth matching economist estimates. The Commerce Department said GDP increased by 4.6% in the second quarter, compared with the previously reported 4.2% growth. The growth was a notable turnaround from the 2.1% contraction seen in the first quarter.

"In a challenging week abroad for the White House, the strongest growth in US GDP since 2008 paints the world’s biggest economy as a beacon of stability amid a very uncertain global picture," says Dennis de Jong managing director at UFX.com.

By Neil Thakrar; neilthakrar@alliancenews.com

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