Another tough day for Tesco

We are fighting to come back to positive this morning after a sharp selloff on the open. The FTSE is currently down 20 points at 6380 having bottomed out at 6313.

A Tesco branch
Source: Bloomberg

Never far from the news recently, Tesco (-5%) shareholders will be hoping that its first-half results are another step on the road back to the promised land of £1 in every £7. No surprises that sales were lower and underlying profits took a dent, but least comforting is the extra £13million unaccounted for, taking the total to £263million. It doesn’t sound like a lot of money when we are talking about such a large company, but the fact that this is another set of numbers with a blemish is a worry.

One could argue that they have gone the way of the banks, and with every new earnings release there comes another blip on the road to recovery, be it personnel changes (another change announced today as the chairman plans his succession) or accounting mistakes. The supermarket is now trading close to its book value, a point highlighted by some analysts that means it could still have further to fall. Its two listed UK peers Sainsbury’s and Morrisons (both lower by 2.5% in sympathy) both trade below the value of their assets.

Macro data has come thick and fast this morning. French business confidence was stable, breaking a five month downward streak, while PMI figures pointed to a stagnant fourth quarter.

German PMI was the saviour as the Markit PMI figure showed a rise in Europe’s engine room, German manufacturing, certainly a comforting thought to European bulls. This even managed to briefly push the DAX above 9000 for the first time in two weeks.

Back in the UK, the weaker-than-expected retail sales for September have been blamed on good weather, a combination most of us will take.

US markets took a turn lower yesterday as inflation disappointed, and oil traded below $81 to continue its pursuit of multi-year lows, while events in Ottawa added some geopolitical risk into the mix. Boeing led the Dow Jones lower as 787 costs outweighed higher earnings. Today pre-market we watch for 3M, economic bell-weather Caterpillar, and post-market we have Microsoft

At the moment the slight weakness in Europe is pushing the opening call for the Dow lower by 25 points to 16,595.

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