London midday: Retailers in focus, markets shrug off Italian downgrade

5th Oct 2011 12:09

Outweighing concerns over Italy's credit rating were hopes that the Europe will strengthen its struggling banks as stock markets across the continent extended their gains at lunchtime on Wednesday.In London, the Footsie was trading well over 2% higher, following on from a dramatic rally on Wall Street late Tuesday night, driven by comments from the European commissioner for economic and monetary affairs. In an interview with the Financial Times, Olli Rehn said, "There is an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states...Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty...This should be regarded as an integral part of the EU's comprehensive strategy to restore confidence and overcome the crisis."The report lifted sentiment in London in morning trade with the miners - sensitive to swings in the global economic outlook - being among the best performers. Xstrata, Rio Tinto and BHP Billiton were all making gains of at least 5% by midday.Investors seemingly shrugged off the news that Moody's had downgraded Italy's credit rating by three notches and gave a negative outlook. Among the drivers for the downgrade is the increased long-term funding risks for highly indebted countries in the Eurozone "as a result of the sustained and non-cyclical erosion of confidence in the wholesale finance environment for euro sovereigns, due to the current sovereign debt crisis," Moody's said.Also not causing too much of a worry was UK gross domestic product figures which came in below expectations for the second quarter. The Office for National Statistics revised its growth forecasts down to 0.1% month-on-month, which will be disappointing to many who were expecting the rate of growth to remain unrevised at 0.2%. This means that second quarter GDP was 0.6% higher than the same period in 2010, down from initial forecasts of a 0.7% improvement.SUPERMARKETS SOLID, BUT TROUBLES ON THE HIGH STREETIn company movements, the retailers were in focus today with some big names reporting their figures.Despite falling early on, Tesco edged mildly higher. While like-for-like (LFL) sales (excluding VAT and petrol) fell by 0.5% in the first half, total sales grew by 8.8%.Rival supermarket Sainsbury made good gains after announcing that revenues grew 7.6% in the first half, as sales growth accelerated in the second quarter.On the FTSE 250, however, the retailers disappointed. High street baby clothes retailer Mothercare lost a third of its market value on news of a 9.6% decline in like-for-like sales in the UK in the last quarter.Trendy fashion retailer SuperGroup saw its share price plummet over a quarter after revealing a major problem at its new Barnwood warehouse in Gloucestershire, which it estimates will cut profits by £6-9m this year. Out-of-town homewares retailer Dunelm fell after seeing like-for-like sales fall by 2% in the first quarter.FTSE Fledgling chocolate maker Thorntons also was out of favour after sales dropped 7.6% in the 14 weeks to 1 October, owing to the tough current retail environment.ECONOMIC NEWS UK services purchasing managers' index rose from 51.1 to 52.9 last month, as growth in the services sector beat expectations. The British Retail Consortium (BRC) shop price index for the month of September has come in at 2.7% on year, the same as the month before.The Eurozone purchasing managers index for the month of September has come in at 48.8, below the 'flash' estimate of 49.1, according to Markit.BCFTSE 100 - RisersGKN (GKN) 166.40p +5.99%Xstrata (XTA) 809.50p +5.96%Legal & General Group (LGEN) 95.10p +5.90%Rio Tinto (RIO) 2,866.00p +5.66%Weir Group (WEIR) 1,450.00p +5.45%BHP Billiton (BLT) 1,756.50p +5.37%Burberry Group (BRBY) 1,170.00p +5.12%Resolution Ltd. (RSL) 244.90p +5.11%Aviva (AV.) 288.80p +4.90%Essar Energy (ESSR) 249.10p +4.80%FTSE 100 - FallersInmarsat (ISAT) 453.30p -4.25%Kingfisher (KGF) 235.70p -1.79%Randgold Resources Ltd. (RRS) 6,060.00p -1.06%Next (NXT) 2,482.00p -0.88%Fresnillo (FRES) 1,488.00p -0.73%United Utilities Group (UU.) 618.00p -0.48%Imperial Tobacco Group (IMT) 2,137.00p -0.14%Marks & Spencer Group (MKS) 312.40p -0.13%Autonomy Corporation (AU.) 2,548.00p -0.08%