Member Article

Consumer squeeze hits owner of Argos and Homebase

Markets opened higher his morning despite Athens being brought to a standstill by more than 70,000 demonstrators who, through a 48 hour strike, voiced their opposition to a further round of austerity measures that are subject to a Greek parliamentary vote tomorrow. In contrast to the chaos on the streets of the Greek capital, investor sentiment was lifted following a Guardian newspaper report last night that suggested a deal had been struck between France and Germany to increase the firepower of the EFSF. The rumours suggested that the bailout fund was to be leveraged to a total of €2 trillion, however the deal was denied by a senior “eurozone source”. The Euro rose on the news, which also benefited US equities as they traded into the market close across the Atlantic.

Banks and insurers were leading markets higher on the back of the aforementioned rumour, although British Sky Broadcasting (BSkyB) was the largest gainers on the FTSE 100 after the delivery of good first quarter results. The market learnt that broadband growth was sufficient to offset lower Sky pay-TV additions, ensuring results came in slightly ahead of expectations. The shares finished up 5.1% to 710p.

In contrast to the above, GKN struggled following the release of its interim management statement and whilst trading was in line with this year’s expectations, visibility into 2012 was less clear and analysts suggested that risks may be to the downside with regards to some emerging market businesses and profit margins. Shares in the automobile part manufacturer closed down 4.7% to 186p.

Outside of the 100 index, shares in Home Retail Group plunged today as a weak consumer environment, combined with competition from supermarkets and online retailers, caused operating profits to fall by more than 70% in the first half of this financial year. A raft of earnings and recommendation downgrades for the owner of Argos and Homebase accompanied the 16.9% decline in its shares which lost more than 20p to finish at 99.5p.

The FTSE 100, having peaked at roughly 1.3% around midday fell back through the afternoon to finish 40 points higher at 0.7%. The UK outperformed its major European rivals as the French CAC40 and German DAX saw gains closer to 0.5%.

This was posted in Bdaily's Members' News section by John Dance .