Europe markets decline; Tesco warning hits London

Shopping trolleys are seen at a Tesco Express in southwest London yesterday. Tesco closed at a hefty loss of 11.59% at 203 pence, hitting its lowest level in more than a decade as the company said it had launched an investigation after revealing that it had overstated its half-year profit forecast by £250mn.

AFP

London

Europe’s main stock markets fell yesterday, with London dragged down by losses to heavyweight mining shares and a fresh profit warning from supermarket group Tesco, Britain’s biggest retailer.

London’s benchmark FTSE 100 index dropped 0.94% to 6,773.63 points and in Paris the CAC 40 slid 0.42% to 4,442.55 compared with Friday’s close.

Frankfurt’s DAX 30 index had initially been lifted by the announcement that Merck KGaA is to buy US speciality chemicals firm Sigma-Aldrich for €13.1bn ($17bn), but closed down 0.51% at 9,749.54 points.

Shares in Merck closed up 4.35% to €72.63 after the German pharmaceutical maker said it aimed to establish “one of the leading players in the $130bn global life science industry” through the purchase.

Sigma-Aldrich shares bolted nearly 34% higher.

In foreign exchange activity, the European single currency was stable against the dollar.

Tony Cross, market analyst at traders Trustnet Direct, said falls on the FTSE 100 “mirrored losses suffered overnight on Asian markets, which were spooked by concerns of a slowdown in China, the world’s second-biggest economy”.

He added: “Traders were taking profits, particularly among the UK-listed miners such as Rio Tinto, which are heavily exposed to demand in the region ahead of Chinese manufacturing data due out on Tuesday.”

In London deals, Rio Tinto shed 3.79% to 3,058.50 pence and Anglo American lost 3.09% to 1,426.50 pence.

However, the biggest faller was Tesco, which closed at a hefty loss of 11.59% at 203pence, hitting its lowest level in more than a decade.

“Considering all the problems that Tesco is tackling at the moment, with its market share being eaten into, profit margins being squeezed and its competitors starting a price war, poor internal accounting issues was the last of its needs,” noted Alastair McCaig, analyst at IG trading group.

Tesco yesterday said it had launched an investigation after revealing that it had overstated its half-year profit forecast by £250mn ($409mn, €318mn).

The news dragged down the supermarket sector, with British rivals Sainsbury closing down 1.93% at 278.80 and Morrison falling 1.6% to 179pence.

In foreign exchange, the euro was basically unchanged at $1.2828 against $1.2829 late in New York on Friday.

It was reacting to comments by European Central Bank chief Mario Draghi Monday who dismissed market disappointment about demand from banks for a new lending programme launched last week, saying it was on track to pump more liquidity into the financial system but needed time to take full effect.

The euro fell against the British pound to 78.49 pence from 78.76 pence Friday, while sterling jumped to $1.6342 from $1.6288.

The pound has recovered strongly against its main rivals since the end of last week, when it was revealed that Scotland had voted to remain part of Britain in a referendum on independence.

On the London Bullion Market, the price of gold closed at $1,213.50, down from $1,219.75 on Friday.