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Britain's FTSE slips from year-high, though Tesco jumps
October 5, 2016 / 9:46 AM / in a year

Britain's FTSE slips from year-high, though Tesco jumps

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* FTSE 100 down 0.4 pct

* Tesco soars after results

* United Utilities retreats after downgrade

By Kit Rees

LONDON, Oct 5 (Reuters) - UK shares fell on Wednesday, slipping from 18-month highs reached in the previous session, though shares in grocer Tesco jumped after reporting strong first-half results.

The blue chip FTSE 100 index was down 0.4 percent at 7,045.09 points by 0913 GMT, slightly outperforming the broader European market which fell following concerns about the European Central Bank’s bond buying programme.

The FTSE 100 hit an 18-month high in the previous session and breached the 7,000 point level for the first time since mid-2015 as sterling dropped on fears that a “hard” Brexit from the European Union could hurt the economy.

The FTSE 250 index also rallied and hit a record high.

“Ultimately, the pound has rebounded a little bit ... but I think if it goes for a run towards the downside again, you may see the FTSE start to edge up again,” Michael Hewson, chief market analyst at CMC Markets, said.

Shares in Tesco, Britain’s biggest retailer, jumped more than 10 percent after it reported a 60 percent rise in first-half operating profit and lifted its margin target.

The supermarket also said it would increase investment in its stores and distribution network to boost profitability over the next three years.

Tesco’s shares hit a 14-month high and were on track for their biggest daily gain since January 2015, while shares in peers Sainsbury and Morrison rose 1.4 percent and 1 percent respectively.

“The clear beat on 1H profit and the very welcome guidance means we expect the share price to build on its already strong performance,” analysts at Barclays said in a note, raising their target price on the stock.

Among the fallers, United Utilities dropped 2.4 percent after RBC Capital Markets downgraded its rating to “underperform”.

Precious metals miners Randgold Resources and Fresnillo also retreated, both down around 2.8 percent after the price of gold hit a three-month low in the previous session on a weaker dollar. (Reporting by Kit Rees; editing by Susan Thomas)

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