LONDON (Alliance News) - The UK's blue-chip index ended the day in the red for the fifth consecutive day Thursday, with about GBP2.4 billion combined wiped off the values of the big three listed supermarkets after a terrible report from Wm Morrision Supermarkets.
Morrisons announced a raft of measures aimed at turning around its business, after it reported a sharp fall in profits for 2013 and warned that the investments it will have to make in 2014 will further erode its profitability.
The company, which was already having to invest heavily to try and catch up with rivals Tesco and J Sainsbury in the fast-growing online and convenience store sectors, admitted that it had been badly hit by customers defecting to heavy discounters like Lidl and Aldi.
Its turnaround measures include heavy investments in price cuts, property disposals, sales of businesses including baby products retailer Kiddicare, and cuts to capital expenditure.
Morrison joined a growing price war in the sector, saying it will invest GBP300 million this year in customer propositions, including price cuts. Last month, Tesco announced it would be investing GBP200million to drive down prices on everyday items, but was trumped by Asda, owned by US retail giant Wal-Mart Stores Inc, which at the same time said it would add GBP100 million to its planned GBP200 million in price cuts this year.
Morrisons closed down 12%, its lowest closing price since July 2006 and the biggest decliner on the FTSE 100, while Sainsbury's closed down 7.4% and Tesco closed down 5%.
The news also hit FTSE 250-listed Ocado Group. The online grocery distributor, which has recently launched a joint partnership with Morrisons, closed down 6.8%, placing it amongst the biggest mid-cap fallers.
The FTSE 350 food and drug retailers sector closed down 6.1%.
Overall, the FTSE 100 closed down 1% at 6,553.78, while the FTSE 250 closed down 0.9%, at 16,186.23, and the AIM All-Share index closed down 0.9% at 879.42.
In Europe, the CAC 40 in Paris closed down 1.3% and the DAX 30 in Frankfurt closed down 1.9%, as markets in Europe and the US fell sharply in late European trade.
European bourses had spent the vast majority of the day trading in tight ranges, "weighed down by concerns about events in the Ukraine, Turkey and this morning?s disappointing Chinese economic data," said Michael Hewson, chief market analyst at CMC Markets.
China's industrial production, retail sales and urban investment all failed to allay fears of a slowdown in the world's second largest economy ,with the three readings growing by less-than-expected in January.
Industrial production increased 8.6% year-on-year in the period, slowing from the 9.7% growth in December, and falling short of economists' forecasts of a more modest decline to 9.5%. Retail sales recorded 11.8% growth year-on-year in January, down from the 13.6% growth recorded in December and missing economists expectations of 13.5%.
Meanwhile, urban investment in China grew by 17.9% year-on-year in January, also down from the previous month when investment grew by 19.6%. Economists had expected investment growth of 19.4%.
Despite host of unexpectedly strong US data, Wall Street also fell sharply. At the close of the UK equity market, the DJIA, NASDAQ Composite and S&P 500 are all trading down between 0.7 and 0.9%.
US retail sales increased by more than expected in February, rising by 0.3%, following a revised 0.6% drop in January. Economists had been expecting sales to edge up by 0.2% compared to the 0.4% decrease originally reported for the previous month.
At the same time, first-time claims for US unemployment benefits showed a modest decrease in the week ended March 8. The US Labor Department said initial jobless claims edged down to 315,000 from the previous week's revised figure of 324,000. Economists had been expecting jobless claims to creep up to 330,000 from the 323,000 originally reported for the previous week.
At the individual UK stock level, and away from the supermarkets, G4S was a big blue-chip faller, closing down 1.9%. The group's share price was knocked following a sequence of negative price target revisions. JPMorgan Cazenove cut its price target to 288.00p, down from 310.00p, Panmure Gordon lowered it to 185.00p from 200.00p, Citigroup dropped it to 250.00p from 270.00p, and Goldman Sachs lowered it to 175.00p from 193.00p.
The fall comes after the troubled outsourcing company slipped 5.3% on Thursday after it revealed that it swung to a loss in 2013 due to the troubles with its UK government contracts.
Northgate, closing down 6.9%, was the biggest faller in the FTSE 250. It saw its shares plummet despite saying that it remains in a strong financial position and is trading in line with expectations. Numis Securities analyst Mike Murphy said the sell-off was as a result of profit taking following a strong share price performance since the beginning of December. Northgate's shares had jumped 40% since the start of December.
Bwin.party Digital Entertainment was amongst the FTSE 250's biggest risers. The company closed up 4.1% after the company's decision to focus on only the most lucrative online betting and gaming markets showed signs of paying off, as it swung to a profit it 2013 thanks partly to much bigger cost reductions than it had targeted.
Home Retail Group, closing up 5%, was the index's biggest winner. The home and general merchandise retailer's shares hit their highest level for nearly three years after it said that it now expects group "benchmark" pretax profit for 2013 to beat the top-end of current market expectations of GBP107 million to GBP111 million after it reported strong like-for-like sales growth from both its Argos and Homebase chains for the financial year just ended.
The news boosted FTSE 100-listed Kingfisher, its larger sector rival, which closed up 2%, making it one of the stand out gainers in the blue-chip index.
In the commodities market, the price of gold has continued to rise Thursday, peaking near a six-month high of USD1,375.09 per ounce. The precious metal has jumped approximately 10% since the end of January, and by almost 3.5% since the end of February as concerns intensify about the health of the Chinese economy and the crisis in Ukraine.
However, it is not just concerns over China and the Ukraine that are driving gold prices higher, says Fawad Razaqzada, technical analyst at Forex.com. ?There is also anxiety surrounding the Indian general election which makes gold the obvious choice for some citizens concerned about the future of their economy or the value of the rupee.?
Furthermore, after India's imports fell sharply in February, ?the pressure is growing on the government to relax some of the trade restrictions on precious metal,? he adds. ?If and when that happens, one would expect a surge in buying from the Indians.?
At the close of the UK equity markets, gold trades at USD1,372.44 per ounce.
In the data calendar Friday, Japanese industrial production figures are released at 0430 GMT. German consumer price inflation readings are released at 0700 GMT. Construction output data for the euro area are scheduled at 0930 GMT, at the same time as UK trade data. Fourth quarter employment change numbers for the eurozone are released at 1000 GMT.
In the US, the producer price index is released by the Bureau of Labor Statistics at 1230 GMT. The Reuters/Michigan consumer sentiment index for March is released at 1355 GMT.
In a quiet day in the data calendar, FTSE 250-listed JD Wetherspoon releases interim results ahead of the UK equity market open.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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