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FTSE 100 looks to recover lost ground Supermarket shares hit by Amazon deal
(about 3 hours later)
The UK's benchmark share index headed higher on Friday as it looked to recover some of the ground lost from four consecutive days of falls. Shares in some of the UK's leading supermarkets fell sharply on the news that online retail giant Amazon is buying upmarket grocer Whole Foods.
The FTSE 100 share index was up 45.24 points, or 0.6%, at 7,464.60 shortly after midday. The announcement sent ructions through the retail sector, with Tesco shares sinking 6.5% and Sainsbury's down 4.5%.
Gains were broad-based, with Worldpay Group, travel firm Tui and Rentokil Initial among the top risers. Marks and Spencer, which also has a sizable food business, fell 2.6%.
Tesco shares had jumped 2% initially after its first-quarter sales growth beat expectations. Neil Wilson at ETX Capital said the deal was "yet another signal of the seismic shift in the market caused by the Amazon model".
The retailer said like-for-like sales rose by 2.3% in the three months to 27 May, boosted by demand for fresh food. Shares in Morrisons, the UK's fourth-largest supermarket chain which has its own tie-up with Amazon, fell sharply at first before recovering to stand just 0.2% lower.
However, Tesco's shares quickly fell back, and were down 0.1% at 179.80p by lunchtime. "Whole Foods has just nine stores in the UK so the impact on Morrisons... should not be too significant, and if anything could support Morrisons if it signals how Amazon might be able to help it grow market share," Mr Wilson said.
Shares in Rolls-Royce rose 1.6% after the engineering group said it had made a good start to 2017, with "all businesses performing in line with expectations". The FTSE 100 share index was up 28.60 points at 7,447.96 in late afternoon trade.
Away from the retail sector, shares in Rolls-Royce rose 1.5% after the engineering group said it had made a good start to 2017, with "all businesses performing in line with expectations".
The company also revealed that the weakness of the pound was set to lift revenues by £400m and profits by £50m. The drop in the value of the pound since the Brexit vote means that Rolls-Royce's dollar earnings are worth more when converted back into sterling.The company also revealed that the weakness of the pound was set to lift revenues by £400m and profits by £50m. The drop in the value of the pound since the Brexit vote means that Rolls-Royce's dollar earnings are worth more when converted back into sterling.
On the currency markets, the pound edged up 0.1% against the dollar to $1.2770, but slipped 0.1% against the euro to 1.1429 euros. On the currency markets, the pound rose 0.2% against the dollar to $1.2787, but slipped 0.1% against the euro to 1.1426 euros.