Britain's main equity index fell to one-month lows on Tuesday, hit by supermarket retailer Tesco's fourth profit warning...
Britain’s main equity index fell to one-month lows on Tuesday, hit by supermarket retailer Tesco’s fourth profit warning this year.
Shares in Tesco at one stage fell as much as 17 percent to their lowest in around 14 years, wiping some 2.6 billion pounds ($4.1 billion) off the firm’s market capitalisation. It later regained some ground to close 6.6 percent lower.
Tesco blamed its lower profit forecast on the cost of trying to recover from an accounting scandal and a slide in its market share.
The stock’s decline also dragged down rivals such as WM Morrison, which retreated by 4.4 percent, and Sainsbury , which fell 1.8 percent.
“It would be appear to be more of the same for Tesco. We all know that pricing pressure on retailers is intense, in particular on clothing retailers and supermarkets,” said Edmund Shing, global equity portfolio manager at BCS Asset Management.
“However, this may be the last ‘big bath’ provisioning and resetting of forecasts by the new CEO so that Tesco can relaunch on a sensible footing.”
Tesco took the most points off the blue-chip FTSE 100 index , which ended 2.1 percent down at 6,529.47 points — near its lowest in a month. The FTSE also suffered its biggest one-day fall since a 2.8 percent drop on October 15.
A further slump in mining and energy shares also weighed on the market. Energy stocks fell as the price of benchmark Brent crude oil touched five-year lows. A supply glut is building as Gulf producers looked ready to ride out plunging prices.
Mining stocks were also hit as aluminium dropped to multi-month lows in London and Shanghai on concerns over excess supply. Other base metals fell before China, the world’s top metals consumer, releases data that is expected to show economic growth is slowing.
But specialist gold mining stocks benefited as the uncertain economic climate drove up the price of gold, with Randgold Resources rising 3.6 percent.
In spite of the market pullback, Charles Hanover Investments’ partner Dafydd Davies still expected the FTSE to rally to 6,800 points by the end of 2014. He said plans by central bankers to stimulate global economic growth would continue to support equities.