FTSE rallies after Sainsbury's shock

The London market gathered momentum today as positive corporate and economic news offset the impact of a profits warning from Sainsbury’s.

The London market gathered momentum today as positive corporate and economic news offset the impact of a profits warning from Sainsbury’s.

The FTSE 100 Index built on early gains to stand 21 points ahead at 4485.1 by mid-morning.

Sainsbury’s shocked investors by announcing that moves to turn round the group’s fortunes would cause annual pre-tax profits to fall significantly below market forecasts.

The supermarket group also signalled the end of its frustrated attempts to find a new chairman by naming former Lloyds TSB finance director Philip Hampton as the successor to Peter Davis.

Shares in Sainsbury’s stayed at the top of the Footsie fallers, losing 15p to 269.75p.

But energy group Centrica buoyed investors by saying it had agreed to sell the AA motoring organisation to a private equity consortium for £1.75bn (€2.6bn). It led the day’s biggest gainers with shares up 16p to 240.5p.

Last night’s decision by the US Federal Reserve to raise interest rates by a quarter percentage point to 1.25% was also helping shares.

Analysts predicted that Wall Street would open on a positive note given the steady-as-she-goes rate decision and hopes for positive non-farm payroll figures and unemployment claims data.

Back in London, industry data showing falling sales at Safeway was chipping away at the market share and stock value of supermarket group Morrison’s, which lost 2p to 229.75p.

Fellow sector player Tesco was also in the doldrums, dropping more than 1% or 3p to 263.25p.

Telecoms group Cable & Wireless was second in the Footsie fallers, down 2% or 3p to 126.75p, after industry counterpart Colt Telecom warned on profits.

Colt’s stock hit the top of the FTSE 250 losers, down more than a quarter or 23p to 57.25p, after saying it had suffered weak demand for data services, which are more profitable than the other telecoms products it provides to the business sector.

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