FTSE loses 0.5% in choppy trade whilst Sainsbury’s enjoys record Xmas sales

<p>The FTSE 100 opened flat before falling back on Wednesday, with investors pausing for breath after Tuesday’s 1.5% charge higher and starting to refocus their […]</p>

The FTSE 100 opened flat before falling back on Wednesday, with investors pausing for breath after Tuesday’s 1.5% charge higher and starting to refocus their gaze towards the sovereign debt situation from earnings with important bond auctions and ECB and BoE rate decisions due out in the next 48 hours.

Earnings have so far provided a welcome change of pace for investors to switch their attentions away from the sovereign debt crisis, particularly with some companies outperforming beaten down market expectations. That said however, we are edging closer to the business end of the week with respective Italian and Spanish bond auctions, their first for the new year, ECB rate and BoE rate decisions, and so naturally after yesterday’s charge higher in the FTSE, traders are starting to look at locking in their gains.

German bond auction sees average yields below 1% for the first time
The German 5-year bond auction today (BOBL) met stronger demand from investors who were also willing to receive an average yield of 0.9%, the first time under 1% for yields and emphasised the market confidence in Germany as one of the few safe havens of the eurozone, despite the crisis. Whilst fears continue that an escalation in the sovereign debt crisis could reduce German activity also, today’s auction shows investors are still more than willing to lend to the country, which also saw an annual GDP for 2011 of 3%, in line with expectations, falling back from 3.6%.

The sceptic in me sees this German bond auction as yet more evidence that in the long term investors continue to demand less and less of a return for their cash in exchange for safety, and this may threaten the longevity of cash in equities over the course of the year, and maintain the short term nature to which trading has exemplified of late.

Sainsbury’s beats sales forecasts
Sainsbury’s beat sales forecast to produce a record performance for the period, giving shares a lift today before pulling back territory. The retailer saw like for like sales grow by 1.2% after VAT, against market expectations for a rise of 0.9%, with the supermarket saying that its ‘Eat Well for Less’ campaign grabbed it further market share.

The strong performance boosts a degree of optimism that the marketing mix at the company has worked well over the Christmas period and puts additional pressure on Tesco, which reports its respective update tomorrow.

Shares fell 2% after an initial surge as prices neared the top of a trading range where resistance lies at 310p after three consecutive days of gains.

SuperGroup shares rise 1.6% after update
Shares in high street fashion chain SuperGroup rose 1.6% in trading after the firm reported a 22% rise in total group sales to £79 million, with like for like retail sales growing 5.8% for the period and 9.3% specifically in December. Wholesale sales fell 4% taking into effect the supply disruptions caused by the new distribution base issues that triggered a profit warning late last year.

At a time when challenger brands and other retailers are being forced to announce early promotions and cut prices in efforts to increase footfall to their stores, it seems SuperGroup’s strategy not to have promotional offers or price discounts on its stock has worked, maintaining profit margins with sales remaining strong. The move not to discount was a bold one by the firm but it seems this update has proved it’s worked and maintained the desirability of the SuperDry brand.

Shareholders have been given a boost by the update, having seen share prices fall 70% from its February 2011 high for the relatively new publicly listed retailer that had seen shares more than treble within one year of going public.

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