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Retailers weigh on US benchmarks

Published: 10:16 20 May 2014 EDT

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If London was looking to the US markets to help end its retreat, it has been disappointed.

US benchmarks are lower, with disappointing trading reports from retailers adding to the gloom.

The Dow Jones is off 66 points (0.4%) at 16,45 and the NASDAQ Composite is down 10 points (0.2%) at 4,116. By comparison, the S&P 500 is not doing so badly, down 3 (0.1%) at 1,882.

Retailers Staples, Home Depot and the splendidly named Dick’s Sporting Goods have all underwhelmed with trading updates.

Stationer Staples is hard hit, shedding more than 10%, as first quarter profits were down 43% year-on-year. The office products group is struggling to cope with online competitors.

Dick’s Sporting Goods takes an even bigger shellacking, losing 16%, after it cut profit guidance for the year.

Other retailers in the doghouse after reporting today include Urban Outfitters, Ross Stores and Lowes.

In the UK, lacklustre updates from two index heavyweights have Footsie in a hole, as it struggles to remain above the 6800 level.

The FTSE 100 is down 42 points (0.6%) at 6,803, despite the number of risers and fallers among its constituents being evenly matched.

Vodafone (LON:VOD) occupies the top loser spot, shedding 4.7% as the telecoms giant reported a decline in service revenue for the fourth quarter, which was worse than analysts had expected.

The mobile phone giant also said earnings this year will be down as much as 11%, with matters not helped by £6.6bn of impairments related to struggling European operations.

It reported a profit of £7.9 billion for the year to March 31, down from £12.6bn a year earlier, on revenues 1.9% lower at £43.6bn.

Marks & Spencer (LON:MKS) reported a fall in annual profits for the third year in a row. Shares in the High Street bellwether are down 1.4% after the results demonstrated the company has still not got things right on the clothing front.
The food side of the business is still going well, but that is little comfort on a day when all of the big food retailers – Morrisons, Tesco and Sainsbury (J) – are out of favour after broker Jefferies said a price war is now in full flow.

"With pricing visibly tightening in the UK in the past weeks, we recognise the growing challenges preventing Tesco from turning itself into a mildly growing, strongly cash generative vehicle," said Jefferies analyst James Grzinic, who has cut his rating on Tesco to 'hold' from 'buy’ and sliced the price target to 310p from 320p previously.

The biggest gainer is cruise ship operator Carnival (LON:CCL), up 3.9% after announcing plans to bolster its Australian fleet.

Shares in AIM-quoted Totally (LON:TLY), which provides digital healthcare solutions, surged 12% after it secured a further contract with the NHS.

The group already operates several NHS contracts for clinical commissioning groups (CCG's) including for Leicester City, Southern Derbyshire and Kingston.

In the resources sector, Premier African Minerals (LON:PREM) is on the up, rising 7.5%, after it completed its purchase and subsequent sale of a stake in Mandalore, a company that has a 30% interest in the Danakil potash project in Ethiopia.
Mediterranean Oil & Gas (LON:MOG) is up 8.1% after it announced that a rig is on its way to drill the Hagar Qim 1 well in Block 7 of Area 4 to the south of Malta.

Tethys (LON:TPL) hardens 4.4% to 23.5p on a show of faith from chief executive officer Julian Hammond, who has bought 100,000 shares at 22.75p a pop.

SolGold (LON:SOLG) shares have surrendered early gains. Shares were wanted this morning after the company described the assay results from its sixth hole from the Cascabel copper-gold project in Ecuador as “highly encouraging”.

Magnolia Petroleum (LON:MAGP) has also fallen into the red after a bright start. The borrowing limit on its credit facility has been raised to US$2.75mln from US$2.1mln previously.

Power supplier Rurelec (LON:RUR), up 5.9%, is on a charge, after it revealed it has been informed that a key council of ministers in Bolivia has given the necessary approval for a Supreme Decree to be issued authorising signature and payment of funds to Rurelec in settlement of the final amount agreed in Madrid. Payment is now expected shortly.

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