Wednesday’s Master Investor Market Report

– The FTSE 100 rose 76.47 points to 6,830.27.
– The FTSE 250 climbed 190.34 points to 18,030.13.
– The FTSE All Share increased by 39.94 points to 3,725.00.
– The FTSE AIM All Share finished 1.64 points higher at 773.73.

Chancellor George Osborne plans to introduce legislation that would require future governments to run a budget surplus when the economy is growing. It is expected that Mr Osborne will make the announcement this evening and that the Office for Budget Responsibility will have to enforce the new regulation. Leaked text from his speech reads “with our national debt unsustainably high, and with the uncertainty about what the world economy will throw at us in the coming years, we must now fix the roof while the sun is shining”.

Twenty six African countries have signed a treaty to create a free trade zone that covers most of the continent. The deal unites three existing blocs into a single body labelled the Tripartite Free Trade Area. However, the arrangement still has to be ratified by national governments and non-legal barriers to trade across the continent remain, most notably the poor quality and limited reach of infrastructure in many areas.

Sainsbury (SBRY) bounced 11.3p higher to 260.3p after it announced first-quarter results that weren’t quite as bad as analysts had feared. The supermarket saw like-for-like sales excluding fuel decline by 2.1% in the 12 weeks ended 6 June, but a drop of 2.3% had been expected. Brewin Dolphin wrote that “even at these levels, Sainsbury’s profitability will be significantly better than its listed peers. The announcement by Morrison’s that it will cut prices further is a marginal negative, but we continue to believe that Sainsbury is the best placed amongst the three listed supermarkets”. Cantor Fitzgerald reiterated a “hold” rating and Societe Generale believe that the firm is more resilient than it may appear.

Financial services outfit Standard Chartered (STAN) rallied 5.8% to 1,094p on speculation that the Chancellor will use his Mansion House speech this evening to announce that the bank levy, which currently raises £3.5 billion annually, will be phased out. Market watchers fear that the tax is pushing major institutions like HSBC (HSBA) towards exiting the UK. A tax calculated solely on domestic assets may replace the current fee, which considers worldwide holdings.

Oil explorer Soco International (SIA) stuck to its guns today and reiterated its guidance on production levels and capital expenditure for the current financial year. It also indicated that the development of its Te Giac Trang field is proceeding ahead of schedule and that it will be considering further rationalisations of its African assets. Shares in the company dropped by 0.6p to 180.3p.

Engineering services outfit Weir Group (WEIR) fell by 8p to 1,914p today after announcing that its revenues and profits for this financial year will be weighted towards the second half. Weir will have surprised few investors with the revelation that their oil & gas division is struggling under current conditions, but also said that the minerals arm was performing well in a subdued sector. Panmure Gordon cut their EPS forecast for Weir to 93p.

LED manufacturer Dialight (DIA) shares slumped by 29.5% to 528p after the firm revealed that orders have not met expectations and therefore full year revenues will not meet targets. The firm has attributed this to a slowdown in the oil & gas industries and has suggested that turnover for the current financial year will fall below last year’s.

Online fashion house Boohoo.com (BOO) increased sales for the 3 months to 31st May by 35% to £41.3 million, driven by an exceptional performance outside of European markets. Customer numbers also grew significantly to 3.2 million. Revenues in both the UK and Europe were strong, despite some adverse currency movements. N+1 Singer described the update as a “key milestone for investors, providing significant reassurance and confirmation that the growth strategy is back on track”. The shares climbed by 3p to 29p.

Tomorrow’s news today

Atkins (ATK), Mulberry (MUL), First Property (FPO), and Halma (HLMA) are all due to report full-year results tomorrow.

On the economic front, we are expecting UK housing price data from RICS and US retail sales figures.

Quote of the day

“Those who understand compound interest are destined to collect it. Those who don’t are doomed to pay it.”
– Albert Einstein