The stock market here in London is trading little changed this morning, after a bumper day of gains on Tuesday which saw the benchmark reach its highest level since the start of December led by a surge in BP as investors rushed to buy the oil major following its latest trading update. The FTSE has pulled back by around 10 points but remains well supported and is looking to extend its recent winning streak with a green close today, which would make it 7 consecutive daily gains. The pound is trading a little higher and seeking to recoup some of the losses after some pretty large scale declines yesterday following the weak service sector data which caused sterling tumble to its lowest level in a fortnight against the buck.
The FTSE has rallied strongly in recent trade, thanks both to an improved overall risk appetite and also a decline in the pound. The market is now firmly back above its 50 day SMA and not far from possible resistance around 7150. Source: xStation
Ocado shares tumble after “substantial” fire damage
The biggest faller of the blue chips today is Ocado, with a decline of almost 8% seen in the stock after the firm warned of a setback, due to a huge fire in its Andover warehouse which is believed to have caused “substantial” damage. As many as 200 firefighters and 20 fire engines were called to tackle the blaze which lasted almost 24 hours and is expected to put a dent in near term operations, with the Andover site accounting for approximately 10% of the firm’s total capacity or roughly 65,000 orders a week. The past year has been a good one for shareholders with the stock more than doubling and gaining promotion to the FTSE 100, but the timing of this setback is no doubt a blow, coming less than a day after the online supermarket announced its latest trading results which were warmly greeted and had sent the stock up to a 4-month high on Tuesday.
Major government contractor unveils rescue plan
Interserve has reached a deal with creditors to prevent its collapse, with one of the biggest suppliers of services to the UK government unveiling details that will essentially hand control of the business to its banks. The news is a major blow for shareholders, with the deal that has been agreed in principle effectively wiping out the vast majority of their stake and leaving them with less than 3% of the company. This is due to banks issuing a debt for equity swap that will see £480m of existing debt replaced with new equity and cause a massive dilution of existing shareholders positions, with the new stock set to account for around 97.5% of Interserve.
Government contractors have been making the wrong sort of headlines for some time now, with Carillion’s collapse last year and Kier group’s well documented problems, and while the latest development for Interserve means it continues as a going concern, it will no doubt leave a bitter taste in the mouth of shareholders who have effectively seen their stake massively diluted to a tiny fraction of what it was. The market reaction has been positive as you’d expect as it seems that Interserve will live to fight another day, and the stock is higher by 12% this morning.