By Carla Mozee, MarketWatch FTSE 100 falls by the most since
October
LONDON (MarketWatch) -- Tesco PLC shares hit their lowest level
in 14 years Tuesday, leading losses on the FTSE 100, after the
supermarket chain issued its fourth profit warning this year.
Tesco's share-price drop came on the same day of a global
selloff in equities that contributed to a 2.1% loss for the FTSE
100 , to 6,529.47. The move marked the FTSE's biggest decline in
nearly two months and its lowest close since early November. None
of the index's sectors ended with gains.
Tesco shares fell 6.9%, wiping off roughly $1 billion from
Tesco's market capitalization. During the session, the shares fell
as much as 17% to trade at prices not seen since February 2000,
according to FactSet data. The selling was triggered after Tesco
cut its full-year profit forecast, citing investments it's making
in its business as it battles rivals. Group trading profit will not
exceed 1.4 billion pounds ($2.2 billion), said Tesco. The
projection compared with analysts' expectations of GBP1.94
billion.
"If there had been hope that the market would be immune to yet
another profit warning, this quickly evaporated, as Tesco has
provided profit guidance which is nearly 30% shy of an already
lowered estimate," said Richard Hunter, head of equities at
Hargreaves Lansdown Stockbrokers, in a note.
Tesco's recovery in the U.K. "could take longer" as Chief
Executive Dave Lewis needs to simplify the business through U.K.
and international asset sales, change payment terms with suppliers,
lower the cost of goods and "start on the long road to rebuilding
the Tesco brand with shoppers," said Mike Dennis, an analyst
covering food and general retail at Cantor Fitzgerald, in a
note.
Tesco rivals were also lower following the profit warning, with
Wm Morrison Supermarkets PLC down 4.4% and J Sainsbury PLC
declining 1.8%. Marks & Spencer Group gave up 1.4%.
The mining group fell as well, with Chinese state media
reporting the government might cut its 2015 growth target to as low
at 7%, down from the 2014 goal of about 7.5%. China's top
leadership is meeting for the annual Central Economic Work
Conference in Beijing. Chinese stocks, which have been soaring
recently, dropped sharply, leaving the Shanghai Composite down more
than 5%, with the downdraft stemming from a new rule from China
that tightens the use of corporate bonds as collateral for
short-term financing.
Mining-sector heavyweight BHP Billiton PLC (BHP) lost 1.6% and
Rio Tinto PLC (RIO) fell 1.2%. Among energy issues, oil-services
company Petrofac Ltd. ended down 3.6% and oil major BP PLC was off
3% . Oil prices (CLF5) remained under pressure, trading at
five-year lows.
"Unless investors close [U.S. dollar] positions in the run-up to
Christmas, or the [People's Bank of China] add further stimulus to
its economy in the coming weeks, it appears unlikely the oil
markets will enter a correction period anytime soon," said Jameel
Ahmad, chief market analyst at FXTM, in a note Tuesday.
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