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Slump in Kingfisher shares weighs on FTSE

Slump in Kingfisher shares weighs on FTSE

Shares in Kingfisher (KGF) have plunged as the home improvements retailer announced a sharp slowdown in trading in June.

B&Q owner Kingfisher fell 7.5% to 310.9p, weighing on the FTSE 100, which traded flat at 6,796 points. The group’s sales rose just 0.8% in the 10 weeks to 12 July, compared to a 6.1% rise in the first quarter.

‘It is unclear whether this recent weakness is short-term phasing in nature, though we will know more by our interims in September having then traded through our key summer months,’ said chief executive Ian Cheshire.

Kingfisher also announced it had sealed a €275 million (£218 million) deal to buy French home improvements retailer Mr Bricolage, but that was cold comfort to analysts of the stock.

‘We were hoping for the second quarter release to address the new risks thrown up by an unhelpful shape to UK first quarter gross margins,’ said analysts at Jefferies.

‘Whilst this is indeed the case today (with gross margins up in all geographies), the new element is a sharp deterioration in demand since June in France / Poland.

‘The impact on profit expectations is limited for now, but future uncertainty will weigh and progress on Mr Bricolage is only of limited comfort.’

EasyJet (EZJ) was another big faller, dropping 4.1% to £13.45 as the budget airline company disappointed investors with its annual profits forecasts.

Factoring in political events in Israel, Egypt and Russia, EasyJet said profits were likely to be between £545 million and £570 million, down on the £569 million analysts had been forecasting.

Reed Elsevier (REL) was the biggest riser on the FTSE, jumping 2.9% to 966p after the media company said it expected a year of underlying profit growth. Strong demand for exhibitions and financial news provided a boost.

‘The results should reinforce the view of Reed as a “safe” yet growing solid defensive name,’ said Ian Whittaker, recommending a switch from rival Pearson (PSON), Financial Times publisher.

Investors continued to tread with caution against the backdrop of the geopolitical crisis between Russia and the West.

‘Markets have been buoyed by Europe’s lack of cohesive action over Russia, but today sees the European Commission debate the tougher economic sanctions that were mentioned at Tuesday’s foreign ministers meeting,’ said Jonathan Sudaria, dealer at Capital Spreads.

‘Expectations are that they will stay true to form and do nothing, but there is always the possibility that international pressure may spur some surprise action with some teeth so traders remain cautious.’

The pound meanwhile fell in the morning’s trading as UK retail sales figures for June came in lower than expected. Sales rose 0.1% month-on-month versus investors’ expectations of a 0.3% rise. Sterling fell to $1.7015 on the news, after having been trading at $1.7037.

The oil price received a boost from strong data from China showing the factory sector of the world’s second largest oil consumer expanded at its fastest rate in 18 months in July. Brent crude was trading at $107.76 a barrel.

Meanwhile, purchasing managers’ index (PMI) figures for the eurozone showed momentum behind the region’s economic recovery. July’s flash composite PMI came in at 54, ahead of 52.8 in June. Any reading above 50 indicates expansion.

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