LONDON
British shares were on the back foot on Monday with a general election looming and some tourism-related shares dented after an attack in London on Saturday, while investors cheered retailer Ocado’s first international deal.
The blue-chip FTSE 100 index was down 0.26 per cent to 7,527.72 points by 0943 GMT, falling back from the record high that it touched on Friday.
A parliamentary election on Thursday was looking more uncertain as some polls suggested Prime Minister Theresa May’s Conservative Party was not certain to win a majority.
Ocado stole the spotlight, surging more than 4 per cent to a 14-month high, after clinching a long-awaited international deal with an unnamed regional European retailer.
The online grocer announced the deal on Sunday, a year and a half after missing a self-imposed deadline to secure one. Ocado said it would provide the partner with the software, know-how and support services required to create an online grocery business.
“Ocado trades at 21 times next year’s EBITDA (earnings before tax, interest, depreciation and amortisation), three times higher than the industry’s 6.6 times. That means Ocado needs lots of big deals to warrant this valuation,” said Bernstein retail analysts, adding that the deal’s earnings potential was currently unclear to them.
Ocado’s shares have gained 37 per cent in the past two months, possibly due to anticipation of a deal.
Markets largely absorbed the geopolitical shocks of an attack in London over the weekend and an escalating diplomatic rift between Saudi Arabia, Egypt, the United Arab Emirates, Bahrain on one side and Qatar on the other.
But travel and leisure sector stocks were among the worst-performing on the index.
The Budget airline easyJet fell 1.9 per cent, and Merlin, which runs attractions including London’s Madame Tussaud’s waxworks museum, fell 1.6 per cent.
British Airways’ owner, IAG, fell 1.3 per cent.
The pan-European sectoral index was down 0.6 per cent.
Stocks that are among the Qatar Investment Authority’s top holdings were little changed. Glencore fell 1.3 per cent in a generally weaker basic resources sector, and Royal Dutch Shell was up 0.05 per cent as oil jumped more than 1 per cent.
Blue-chips hit a session low after a PMI survey indicated Britain’s services had grown more slowly than expected last month as businesses put off investment decisions before this week’s national election, and higher inflation squeezed households.
Elsewhere, broker notes sent some stocks south, with miners particularly targeted.
Antofagasta was the top blue-chip faller, down 2.4 per cent after HSBC cut it to ‘reduce’ from ‘hold’.
Kaz Minerals was the top loser among mid-caps, down 3.8 per cent after HSBC cut its rating on the Kazakhstan copper miner to ‘reduce’ from ‘hold’, citing recent weakness in copper prices and strength in the Kazakh currency, the tenge.
Vedanta Resources also fell 2.9 per cent after JP Morgan cut its price target on the stock.
