Business

Supermarket rally offsets services sector slowdown

Morrisons, the only one of the "big four" supermarkets to post a sales rise in the Kantar data, was near the top of the FTSE 100 risers board yesterday as shares climbed another 3 per cent, or 5.6p, to 178.1p PICTURE: Morrisons/PA
Morrisons, the only one of the "big four" supermarkets to post a sales rise in the Kantar data, was near the top of the FTSE 100 risers board yesterday as shares climbed another 3 per cent, or 5.6p, to 178.1p PICTURE: Morrisons/PA Morrisons, the only one of the "big four" supermarkets to post a sales rise in the Kantar data, was near the top of the FTSE 100 risers board yesterday as shares climbed another 3 per cent, or 5.6p, to 178.1p PICTURE: Morrisons/PA

LONDON'S top share index gained ground yesterday as a supermarket share rally offset disappointing data from the powerhouse services sector.

Morrisons extended its share gains to a second session after industry data on Tuesday signalled its first rise in sales for nearly 18 months, while Sainsbury's and Tesco were also among the session's biggest risers as the research pointed to a slowdown in damaging food price deflation.

The wider FTSE 100 Index rose 22.2 points to 6950.5 despite figures showing Britain's dominant services sector suffered its sharpest slowdown in growth for nearly four years in May.

The closely-watched CIPS/Markit purchasing managers' index (PMI) survey reported a reading of 56.5 for the services sector.

This was down sharply from 59.5 in April  marking the steepest decline since August 2011.

The figures came as the Organisation for Economic Co-operation and Development (OECD) also cuts its growth forecast for the UK to 2.4 per cent for 2015 from 2.6 per cent previously.

The pound had fallen against most major currencies earlier in the day as economists said the services figures put paid to any likelihood of an imminent interest rate rise.

Sterling later recovered to edge slightly higher at US$1.53 but a strengthened euro saw the pound fall a cent to 1.36.

Positive economic data from the Eurozone and hopes over a deal for debt-laden Greece amid ongoing bail-out talks helped the Cac 40 in France and Fax in Germany move 0.6 per cent and 0.8 per cent higher respectively.

The Dow Jones Industrial Average on Wall Street was also 0.5 per cent higher at the time of the London market close.

In London, supermarkets were higher as analysts digested Tuesday's data from Kantar Worldpanel, with experts at Bernstein saying it showed the first signs of inflation turning the corner.

Kantar said food deflation narrowed to 1.9 per cent in a reversal of the previous trend which had seen the rate deepen to 2.1 per cent.

Morrisons, the only one of the "big four" supermarkets to post a sales rise in the Kantar data, was near the top of the FTSE 100 risers board as shares climbed another 3 per cent, or 5.6p, to 178.1p.

Sainsbury's showed a narrow decline in sales but also benefited from the positive sentiment yesterday, with shares up 2 per cent, or 4.7p, at 249.8p. Tesco, which saw sales fall 1.3 per cent, saw a boost too, with the stock climbing 3p to 210.4p.

Online grocer Ocado was another beneficiary in the FTSE 250, up 5 per cent or 16.3p to 371.3p.

Elsewhere, Carphone Warehouse and Currys PC World owner Dixons Carphone was in focus as a trading update showed better than expected sales and prompted a profit upgrade from the group  but shares slipped after a recent strong run, down 4.5p to 474.8p.

In the FTSE 250, WH Smith rose 2 per cent or 34p to 1572p as the retailer said the roll-out of its Food to Go range helped like-for-like sales in its travel arm lift 4 per cent in the 13 weeks to May 30.

The biggest FTSE risers were CRH up 61p to 1853p, Morrisons ahead 5.6p to 178.1p, TUI 27p higher at 1192p and Direct Line Insurance 7.4p stronger at 346.4p.

The biggest FTSE fallers were British Land down 23p to 829p, International Airlines Group off 11.5p to 543.5p, Land Securities 22p lower at 1272p and Vodafone 4.2p weaker at 250.4p.