LONDON MARKET MID-MORNING: FTSE 100 Higher Led By Grocers And Shell

LONDON (Alliance News) - London shares are mixed at mid-morning as investors await news from the Greek debt negotiations, which have resumed Wednesday ahead of the Eurogroup meeting taking place in Brussels this evening.

On the London Stock Exchange, supermarkets Wm Morrison, J Sainsbury and Tesco are leading the FTSE 100 after a broker note published by Societe Generale, while Royal Dutch Shell also is amongst the best performers after being upgraded to Buy by Deutsche Bank.

The blue-chip index is up 0.5% at 6,868.67, outperforming other major indices in Europe. The mid-cap FTSE 250 is down 0.1% at 17,977.27, and the AIM All-Share is flat at 770.04.

The CAC 40 in Paris also is flat, while the DAX 30 in Frankfurt is down 0.2%.

German business confidence weakened more than expected in June, reports said citing survey results from Munich-based Ifo Institute. The business confidence index fell to 107.4 in June from 108.5 in the prior month. It was expected to ease to 108.1.

European and US investors attention will be mainly focused in the coming days on Brussels, where EU officials will attend to several meetings replete with challenges straining the bloc. There is an eurogroup meeting scheduled for Wednesday at 2000 BST, while the European Council meeting is starting on Thursday at 1600 BST until Friday afternoon.

But ahead of the eurogroup meeting, Greek Prime Minister Alexis Tsipras is conducting yet another round of crisis talks in Brussels with representatives of the country's creditors. A statement issued by Tsipras' office late Tuesday said that he would meet Wednesday at 1000 BST with European Commission President Jean-Claude Juncker, International Monetary Fund Managing Director Christine Lagarde and European Central Bank President Mario Draghi.

Tsipras is expected to urge the creditors to reach a compromise with him this week on Greece's economic reform proposals, which were submitted to the institutions on Monday.

At the European Council summit of EU national leaders, apart from the economic situation in Greece, the deadly migration crisis in the Mediterranean Sea and the diplomatic tensions with Russia will be on the menu too, along with the European identity crisis in Britain. Hopes for a blockbuster free trade deal with the US and dreams of a stronger eurozone union will round off their two days of talks.

"This moment in the EU's development is not a dress rehearsal," warned European Council President Donald Tusk in a recent speech. "We must do what needs to be done, now, with a strong sense of purpose, or Europe goes backwards."

US President Barack Obama's push for greater authority to negotiate trade deals moved a step closer to reality Tuesday after the measure cleared a key procedural hurdle in the Senate. The Senate voted 60-37 to limit debate on the Trade Promotion Authority measure and was expected to approve the bill in a separate vote as soon as Wednesday. TPA is considered a key element for completion of trade deals under negotiation with Pacific Rim countries and the EU.

Wall Street closed slightly higher Tuesday, with the DJIA, the S&P 500 and the Nasdaq Composite closed all up 0.1%.

In London, grocers are amongst the biggest blue-chip gainers. Morrisons is up 2.9% at 185 pence, Sainbury's is up 2.8% at 276.7p, and Tesco is up 1.6% at 219.55p.

Societe Generale said it expects Morrisons to continue to underperform the other two in terms of like-for-like sales growth "due in particular to its limited exposure to online and convenience, the two most dynamic segments in the UK grocery market."

SocGen analyst Arnaud Joly highlights that Wm Morrison needs to clarify its positioning and strengthen its differentiation, saying he expects more clarification from new Chairman Andrew Higginson and new CEO David Potts in September with the publication of interim results.

SocGen keeps a Sell stance on Morrisons, cutting its price target to 150p from 160p. The broker upgrades Sainsbury's to Buy from Hold, raising its price target to 315p from 260p, saying that the grocer's profile is more resilient than many fear. Meanwhile, SocGen says it remains too much uncertainty over Tesco to justify a re-rating in the short term, and therefore it keeps a Hold stance and a price target of 235p on the stock.

Royal Dutch Shell 'B' and 'A' are up 2.0% and 1.9%, respectively, after Deutsche Bank upgraded the oil giant to Buy from Hold, following a "torrid" start to the year that has seen the company's share price significantly underperform its peers.

"Our reasons for upgrading Shell are clear," Deutsche says. "In our view the Shell dividend is sustainable; the BG [Group] transaction with all its strategic logic will proceed; the restructuring possibilities at Shell assuming its completion are substantial; management intent to reshape Shell 'legacy' is decided; and with the shares now trading at a 6.3% dividend yield, they are at a level from which we see limited relative or, indeed, absolute downside. "

BG Group shares also are higher, up 1.9%.

Shares in retailer Next are up 1.7% after Barclays upgraded it to Overweight from Equal Weight, while in the FTSE 250, Capital & Counties Properties is up 1.9%, after being upgraded by Exane BNP to Underperform from Neutral.

Meanwhile, Elementis is trading in the opposite direction, down 14%, after the specialty chemicals company said its earnings per share will miss market expectations for the full year. It said it is taking a hit from conditions in the oil and gas market, from additives sales in China, and from local currency weakness in Latin America for its personal care arm.

In the economic calendar Wednesday, US mortgage applications data are set to be released by the Mortgage Bankers Association at 1200 BST. US GDP data for the first quarter are due to be published at 1330 BST, at the same time as US personal consumption expenditure data.

By Daniel Ruiz; danielruiz@alliancenews.com

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