Market report: Goldman Sachs kicks Marks & Spencer closer to relegation from the FTSE 100

M&S could be relegated from the FTSE 100 on Wednesday
PA
2 September 2019

Shoppers may be buying up the last of its back-to-school ranges, but Marks & Spencer found itself at the bottom of the class as much of the City returned to work today.

With the summer over, attentions turned to which stocks will be dumped out of the FTSE 100 at the latest quarterly reshuffle based on tomorrow’s closing valuations.

M&S, alongside Direct Line and Micro Focus, appears most likely and was given little help in avoiding the drop by Goldman Sachs. Analysts at the Wall Street behemoth reinstated coverage of the stock with a Sell rating, saying industry data suggests its fashion and food arms are both struggling.

Chief executive Steve Rowe is under pressure to improve clothing sales and boost food margins. He has inked a tie-up with Ocado to sell food online. Goldman did say that M&S grub sold through Ocado could gain “better traction” than Waitrose goods but its target price for the stock of 170p was investors’ main focus. M&S, which has more than halved in five years, fell 2p to 190.5p.

Industrial conglomerate Smiths Group touched its highest in more than a year on reports buyout firms are circling its medical equipment business. Blackstone and Cinven are said to be interested in the unit, which makes patient monitors and drugs delivery systems used in ambulances. Smiths had planned to merge the division with US rival ICU last year but the deal collapsed, leaving Smiths planning a listing of the unit. Shares rose 6p to 1675p and Liberum analyst Ryan Gregory believes a “clean exit” from the unit rather than a spin-off listing would be better.

The FTSE 100 weathered the latest US-China tariffs thanks to mining stocks. They benefited from a rise in iron ore prices after China pledged support to its economy. Nickel gained on Indonesia’s move to expedite an ore exports ban. The Footsie gained 68.51 points to 7275.69. US markets were closed for Labor Day.

Heavyweight miners Rio Tinto and Anglo American advanced, up 33p to 4182p and 6p to 1780p.

Investors in FTSE 250 veterinary drugs maker Dechra Pharmaceuticals had a shot in the arm as it hiked its final dividend from 18.2p to 22.1p per share. The shares sprang up 18p to 3018p but it is bracing itself for a no-deal Brexit.

It has shifted the ownership of its UK marketing authorisations to the Netherlands and moved product testing from Yorkshire to Croatia and the Netherlands.

SMALL-CAP SPOTLIGHT

He's toured many PR-hungry prime ministers around his Stoke-on-Trent factory but today was Lawrence Bryan’s turn to move on. The boss of Portmeirion is to step down after nearly 25 years at the pottery maker, to be replaced by finance chief Mike Raybould. The AIM-listed shares fell 13p to 862p.