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Supermarket shares struggle after Amazon's deal for Whole Foods

Supermarket shares fell to the bottom of the FTSE 100 as news of Amazon's £10.7 billion takeover of Whole Foods sparked jitters over fresh competition in the grocery sector.

London's blue chip index ended the day up 0.6% or 44.18 points at 7,463.54, but listed shares in Tesco closed down 8.85p at 171.1p lower, while J Sainsbury dropped 10.10p to 252.3p, and Marks and Spencer Group fell 6.6p to 345.2p.

Tesco shares had previously been on the rise after reporting its sixth consecutive quarter of positive sales, but were hit after Amazon announced it was acquiring supermarket chain Whole Foods in an all-cash deal worth 13.7 billion US dollars (£10.7 billion).

With nine of Whole Foods stores already in Britain, the move ramps up Amazon's stake in the global grocery market following its launch of AmazonFresh which entered the UK market last year.

Connor Campbell, a financial analyst at SpreadEx, said: "This marks Amazon's first major venture into the realm of bricks and mortar.

"It also sees a significant expansion of the company's food sector intentions, this latest move a major step up from its AmazonFresh and Prime Pantry services (which in the UK are part supplied by Morrisons).

"Just as Alphabet dominates online life, it seems Amazon is trying to siphon off each and every cent from the Western world's wallet."

Shares in Morrison Supermarkets - which has a standing deal to sell groceries through Amazon - rose 2.7p to 242.6p.

In currency markets the pound was mixed, rising nearly 0.2% versus the US dollar to 1.277 but falling 0.1% against the euro to 1.141.

Across Europe, the French Cac 40 and German Dax rose by 0.89% and 0.48% respectively.

In oil markets, Brent crude prices rose 0.8% to 47.16 US dollars per barrel (£36.85) as pessimistic trading positions on the commodity started to expire.

Investors who shorted Brent crude - essentially betting that the price would fall - have been piling in now that those positions have come to a close.

In UK stocks, British Airways owner IAG saw shares rise 4.5p to 588.5p despite news that cabin crew will stage a two-week strike in a long-running dispute over pay and travel concessions, starting on July 1.

Rolls-Royce shares climbed 12.5p to 907.5p after the aircraft engine maker said in a trading update that the collapse in sterling will give it a £400 million boost to revenues and a £50 million rise in profits.

Shares in Sthree ended the day higher by 6.5p at 310p as strong performance in the US and Europe offset a 16% drop in half-year gross profits at its UK and Ireland arm, caused by a slower jobs market after the Brexit vote.

The biggest risers on the FTSE 100 were St James's Place up 50p to 1,236p, Mondi up 83p to 2,093p, DCC up 265p to 7,495p, and WorldPay Group up 11.3p to 323.3p.

The biggest fallers on the FTSE 100 were Tesco down 8.85p to 171.1p, J Sainsbury down 10.10p to 252.3p, Anglo American down 27.8p to 967.3p, and Marks and Spencer Group down 6.6p to 345.2p.

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