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Tesco troubles continue to weigh on FTSE and rivals

Tesco troubles continue to weigh on FTSE and rivals

Shares in Tesco (TSCO) have continued to fall, dragging down other supermarket stocks and the FTSE 100 with it, amid continuing fallout from its dividend cut and profit warning.

Tesco fell 1.7% to 226p in the morning’s trading, after ending Friday’s session 6.6% down, as the supermarket was dealt another blow when one of its biggest shareholders accused it of operating an ‘incoherent strategy’.

US fund group Harris Associates reduced its stake in the business from more than 3% in June to about 1.4%, according to the Financial Times. Harris chief executive David Herro said: ‘We lowered our stake because of unclear management direction and incoherent strategy as both the chief executive and the chief financial officer will be new and we have no idea how the company will proceed.’

Morrisons (MRW) followed Tesco lower, dropping 2.1% to 173.6p, while Sainsbury’s (SBRY) fell 1% to 287.3p. The FTSE 100 was down 15 points, or 0.2%, at 6,805.

ITV (ITV) was among the risers, trading 1.7% higher at 214.8p, as the Sunday Telegraph reported Liberty Global was canvassing support among major ITV shareholders for a takeover bid. Virgin Media owner Liberty Global acquired a 6.4% stake in ITV in the summer.

‘Over time, Liberty has been very acquisitive in the cable/broadcast space; hence, this is no surprise to us’ said analysts at Peel Hunt, who have the stock rated ‘buy’. ‘In our view the ITV valuation is very undemanding at current levels.’

Fresh data meanwhile pointed to a slowing in the pace of UK economic growth. The purchasing managers’ index for UK manufacturing has hit a 14-month low of 52.5 for August, down from 54.8 for July. Any reading above 50 indicates expansion. Mortgage approvals in July have meanwhile slowed to 66,600, down from 67,200 in June.

The pound fell to $1.6617 on the manufacturing data from $1.6645 beforehand, but is still up on the day.

‘All in all, the data is pointing to a slowing in the rate of economic growth, which plays into the hands of the more dovish members of the Bank of England’s monetary policy committee,’ said James Knightley, economist at ING Bank. ‘As such it does look as though February is more likely the start point for policy tightening rather than November.’

Shares in ‘mid cap’ stock Perform (PER) surged after investment group Access Industries launched a 260p-per-share bid for the sports rights group. Shares in Perform jumped 26.3% to 257.3p.

Access already owns 42.5% of Perform and said its offer was final. The Perform board said in a statement it reiterated its confidence in the company’s ‘standalone strategy’ and urged shareholders to ‘take no action at this time’.

Fellow mid cap stock Afren (AFRE) continued to fall, dropping 2.6% to 94p. The oil explorer announced on Friday the suspension of two associate directors for receiving unauthorised payments for the benefit of its chief executive and chief operating officer, who have already been suspended.

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