Slower Growth at Sainsbury, UK Stocks Fall

123jump.com Staff
18 Jun, 2008
New York City

Stocks in London fell sharply after Chancelor of Exchequer cautioned against rising expectations of higher wages. The sharp rise in wages at a recent settlement between striking petrol tank drivers and Royal Dutch Shell prompted commnets. In London trading stocks fell, led by a sharp decline in banks and home builders. J Sainsbury reported first quarter sales rise at a slower pace on 3% increase in food cost.

[R]1:00PM New York, 5:00PM London-Darling warns of wage inflation. J Saiinbury sales rose at a slower pace.[/R]

London market averages fell led by homebuilders and retailers on investor downgrades and negative earnings news.

Market sentiment

In London trading FTSE 100 dropped 1.79% or 105 at 5,756.90.

Of the 102 FTSE 100 index stocks, 8 gained and 94 declined. Smith & Nephew led advancers in the index shares with a rise of 2.85% followed by GlaxoSmithKline gaining 2.04%.

Darling cautions over inflationary wages

Chancellor of the Exchequer Alistair Darling cautioned against the big wage-price spiral that has plagued Britain, which is already in the throes of rising food and energy prices.

Darling also warned trade unions that the country risked lapsing into the “1970s-style inflationary pay demands”. He commented after a large hike in wages was secured by Royal Dutch Shell gasoline tanker drivers. His comments were first published in the Financial Times.

BOE considered increasing rates

Minutes of the Bank of England’s monetary policy meeting held for two days on June 4 indicated that of the eight members of the committee David Blanchflower preferred cutting the rate by 25 basis points.

According to the minutes, some of the members were of the opinion that if there was a serious threat to the medium-term inflation expectations then a pre-emptive rate increase is better than a delayed response only increase the cost of bringing inflation back in the target range.

J. Sainsbury falls on sales decline

The expensive grocery store chain, J Sainsbury plc reported first quarter revenue rose 8.1% from a year ago and sales increased 4.5% after excluding gasoline sales. Comparable sales in the quarter rose 7.3% and rose 3.4% without fuel.

During the conference call the company reported that food volumes were marginally higher in the quarter and fuel sales volume rose despite the average price near over £1.20 a litre. The prices of food items rose 3% and non-items fell in the quarter.

At closed the stock fell 3.2% or 10.50 pence to 325.50 pence on 12 million trading volume. J Sainsbury, the largest supermarket in the UK has a market value of £5.7 billion.

Gainers & Losers

Smith & Nephew led advancers in the FTSE 100 index shares with a rise of 2.85% followed by increases in GlaxoSmithKline of 2.04%, in Compass Group of 0.89%, in International Power Plc of 0.89%, and United Utilities of 0.68%.

Persimmon led decliners in the FTSE 100 index shares with a decline of 8.11% followed by losses in London Stock Exchange of 7.08%, in Next Plc of 5.81%, in Tate & Lyle of 5.24%, and Marks & Spencer of 5.21%.

Homebuilders fell after Credit Suisse Group AG downgraded the UK real estate industry from “overweight” to “underweight”.

British Land Co. shed 4.22% and Land Securities slumped 3.83%.

Financial stocks also dropped as Morgan Stanley reported that second quarter earnings fell by 50% notwithstanding pre-tax gains from asset disposals. Barclays fell 4.19%, Alliance & Leicester tumbled 4.16%, and Standard Chartered dropped 3.79%.

Retailers also fell on weak earnings news from Sainsbury. Wolseley dropped 4.85% and Kingfisher edged down 4.73%.

Woolworth’s Trevor Bish-Jones to step down

Woolworths Group announced on its Web site today that Trevor Bish-Jones will resign as chief executive and will stay on the post for three months while new leader is searched.

Precious metals rise

At 4:16 PM, in London, gold gained $8.40 to $887.50 an ounce. Silver advanced 34 cents to $17.00 an ounce, platinum gained $36 to $2,103 an ounce and palladium gained $6 to $467 an ounce.

Asian markets review

In Tokyo Nikkei 225 Index closed higher 104.45 or 0.73% to 14,452.82, in Hong Kong Hang Seng index increased 267.81 or 1.16% closed to 23,325.80. In Australia ASX 200 index higher 20.50 or 0.38% to close 5,443.20. In Malaysia KL Composite index decreased 15.17 or 1.24% closed to 1,212.59.

In South Korea Kospi Index increased 23.42 or 1.34% to close at 1,774.13, in Thailand SET index closed lower 11.43 or 1.47% to 765.74 and Indonesia JSE Index edged decreased 13.40 or 0.56% to 2,364.58. Sensex index in India decreased 274.59 or 1.75% to 15,422.31.