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A wave of negative sentiment has engulfed the supermarkets this morning. Morrisons (-7%) was always expected to disappoint after pre-warning investors earlier in the year that profits would disappoint, but the market was not prepared for a miss of around 50%; the stock is now at its lowest since November 2008. This has caused contagion-selling in Sainsbury's (-6%) and Tesco (-2%), with the fall in the former explained by it being much closer to the size of Morrisons.
This under-performance raises some interesting questions. Does another rout in Morrisons stock make it attractive to the same potential suitors that went cold when the buyout story was touted as recently as last month? Or does it just show the frailties of the company, as the discount retailers erode their customer base on much of their home turf? It is certainly a case of 'buyer beware' in this sector as a whole.
Our Food and Drug Retailers sector is down nearly 4% today, 8% year-to-date against a FTSE 100 down only 2%. The big three UK listed supermarkets make up 85% of this, with Tesco the lion’s share of that.
Worth noting today is the DAX: we have been watching a key trendline support around the big figure level of 9200, and it is currently holding slightly above there.
A lack of chatter on the wires regarding Ukraine is certainly helping hold up the index, and in Europe as a whole the day is a mixed one.
The US markets are being called to open modestly higher, and we anticipate the Dow Jones to open at 16,370, up 30. Look out for further weather-related analysis from US retail sales for February, at the daylight savings adjusted earlier time than normal of 12.30 (London time).