Sainsbury Sales Rise, Legal & General Loss

123jump.com Staff
25 Mar, 2009
New York City

UK gilt offering fails to cover for the first time in seven years. J. Sainsbury Plc same store sales including fuel in the fourth quarter gained at the slowest pace. Legal & General dropped 7.2% after it reported 2008 net loss of 1.1 billion pounds and cut its dividend by half to 2.05 pence.

[R]3:30PM New York, 7:30PM London – UK gilt offering fails to cover for the first time in seven years. J. Sainsbury plc same store sales including fuel in the fourth quarter gained at the slowest pace.[/R]

Stocks in London trading dropped for the second day in a row as insurers dominated the trading sentiment. Only few days ago stocks in the sector surged after Prudential Plc reported strong capital base and lifted stocks in the sector as much as 30% in three following days of trading.

Legal & General dropped 7.2% after it reported 2008 net loss of 1.1 billion pounds and cut its dividend by half from 4.1 pence to 2.05 pence.

Market Movers

The FTSE 100 index declined 11.21 or 0.3% to 3,900.25 and FTSE All-Share Index gained 0.3%. Of the stocks in FTSE 100 index, 35 increased 65 declined and 2 were unchanged.

Smiths Group Plc led decliners in the FTSE 100 index with a loss of 14.4% followed by losses in Aviva Plc of 11.6%, in Legal & General Group of 7.3%, in Invensys Plc of 6.7% and in Amlin Plc of 5.8%.

Lloyds Banking led gainers in FTSE 100 index with a rise of 6.6% followed by increases in Barclays Plc of 4.8%, in Liberty International Plc of 4.4%, in Randgold Resources Ltd of 4.2% and in National Grid Plc of 3.6%.

Debt Auctions Fails to Cover

The UK government failed to attract buyers to finish its auction for treasury securities known as gilts. UK Debt Management Office attracted bids for only 1.63 billion pounds for a sale of 1.75 billion pounds with 40 years of maturity.

The monthly debt sale came when the UK government is struggling with falling government revenues and investors’ confidence is low around the world.

Investors shied away from the long dated maturities when the inflation is on the rise, pound is weak and government is planning to huge amount of debt. UK government plans to sell 146 billion pounds of debt in the current fiscal year and 148 billion pounds in fiscal 2010.

The yield on 10-year government securities gilt rose 4 basis points to 3.37% according to the data reported on Bloomberg News. The pound declined to $1.458 and fell to 92.33 pence against euro.

UK is expected to have 8% budget deficit in the current fiscal year and is expected to be as high as 11% in fiscal 2010.

The debt auction failed to cover for the first time since 2002 when inflation protected bond auction failed to generate the sufficient demand. The gilt auction not linked to inflation also failed to garner enough attention in 1995.

If the current weak demand continues, the UK government may have to trim its gilt offerings or increase the yields on the bonds which only increase the government’s borrowing costs.

Sainsbury Same Store Sales Rises

Fourth quarter sales at the third largest supermarket increased 3.4% and excluding fuel sales rose 6.8%. Same store sales in the quarter increased 2.7% and excluding fuel rose 6.7%.

The company promoted store branded precuts in its latest ad campaign to increase sales. The upscale retailer has 600 store branded products and sales are up 60% from a year ago. Online home shopping service registered sales rise of 20% in the quarter and company claimed success in selling apparel line Tu brand without giving any details.

Sainsbury stock closed down 7.25 pence or 2.2% to 330.75.

European Markets Update

In London FTSE 100 Index closed lower 11.21 or 0.29% to 3,900.25, in Paris CAC 40 Index increased 19.06 or 0.66% to close at 2,893.45 and in Frankfurt DAX index higher 35.93 or 0.86% to close at 4,223.29. In Zurich trading SMI increased 46.72 or 0.95% to close at 4,970.38.