2-7-18 5:28 AM EST | Email Article

By Sara Sjolin, MarketWatch

Tesco shares drop after report it might face a GBP4 billion equal-pay claim

U.K. stocks advanced for the first time in seven sessions, rebounding from a 10-month low after U.S. bourses ended an extremely volatile session with their biggest gains in years.

Home builders took part in the London rally on Wednesday, even after a downbeat report on the U.K. housing market in January.

What are markets doing?

The FTSE 100 index rose 0.5% to 7,173.70, after closing at its lowest level since April last year on Tuesday.

The pound fell to $1.3918 from $1.3950 late Tuesday in New York.

What is driving the market?

U.K. stocks rose as part of a broader European upswing, which came after a severe selloff on Tuesday sent the region's indexes to multi-month lows (http://www.marketwatch.com/story/european-stocks-open-with-sharp-losses-after-wall-street-carnage-2018-02-06). That fall was prompted by a bloodbath for stocks on Wall Street on Monday afternoon, when the Dow Jones Industrial Average suffered its biggest one-day point drop ever.

U.S. stocks, however, on Tuesday snapped back to close firmly in positive territory (http://www.marketwatch.com/story/dow-futures-swing-wildly-in-battle-to-recover-from-historic-selloff-2018-02-06), inspiring an upbeat trading mood in London on Wednesday.

On a sector-specific basis, housebuilders were in focus after a report from lender Halifax showed house prices in the U.K. fell 0.6% (https://static.halifax.co.uk/assets/pdf/mortgages/pdf/January-2018-House-Price-Index.pdf) in January month-on-month. On an annual basis, house prices rose 2.2% in the three months to January, down from growth of 2.7% in the three months to December.

What are strategists saying?

"Whilst is an encouraging start for the FTSE, investors will be keeping an eye on U.S. futures, which are once again pointing to a softer open," said Fiona Cincotta, market analyst at City Index, in a note.

"Whilst we don't expect this selloff to continue for an extended period of time, given that the fundamentals remain strong and unchanged, it is difficult to call the bottom and judge whether stocks have fallen sufficiently for investors to see value once again," she added.

U.S. stock futures pointed to a day in red for Wall Street, with futures for the Dow Jones Industrial Average down more than 200 points (http://www.marketwatch.com/story/dow-poised-to-slide-give-up-chunk-of-rally-2018-02-07).

Read:50-year Wall Street veteran says this sure feels like a stock-market bottom (http://www.marketwatch.com/story/50-year-wall-street-veteran-this-sure-feels-like-a-stock-market-bottom-2018-02-06)

And see:Here's how U.S. stocks typically perform in the aftermath of a major rout (http://www.marketwatch.com/story/heres-how-the-stock-market-typically-performs-in-the-aftermath-of-a-major-rout-2018-02-06)

Which stocks are in focus?

Among housebuilders, shares of Taylor Wimpey PLC (TW.LN) rose 1.3% and Barratt Developments PLC (BDEV.LN) climbed 0.9%.

Severn Trent PLC (SVT.LN) moved up 1.4% after the water utility company confirmed its 2018 outlook and said it has reduced financing costs (http://www.marketwatch.com/story/severn-trent-cuts-financing-costs-sees-fy-in-line-2018-02-07).

Shares of Tesco PLC (TSCO.LN) (TSCO.LN) slipped 0.7% after reports the supermarket chain is facing a possible GBP4 billion compensation claim (http://www.marketwatch.com/story/tesco-faces-equal-pay-claim-of-up-to-4b-guardian-2018-02-07) over equal pay.

"Investors may take some time to really assess this as it has come out of the blue, but it appears to be a serious claim and one that clearly poses downside risks to the stock. Tesco's market cap is around GBP16bn with underlying profits last year of GBP1.2bn, so a GBP4bn bill would be significant," said Neil Wilson, senior market analyst at ETX Capital, in a note.

Outside the FTSE 100 index, shares of Tullow Oil PLC (TLW.LN) climbed 2.9% after the oil-and-gas explorer said its loss narrowed by 68% in 2017 (http://www.marketwatch.com/story/tullow-oil-net-loss-narrows-68-2018-02-07).

 

(END) Dow Jones Newswires

February 07, 2018 05:28 ET (10:28 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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