AGGRESSIVE DISCOUNTING TO LIFT TESCO
THERE were rumours flying around the markets last week of a profit warning by Carrefour – the world’s second largest supermarket – but this side of the Channel, things in the grocery market are looking a lot rosier. Morrisons has been doing well, as has Sainsbury’s.
But size does seem to matter and Tesco is the third biggest in the world, and hot on Carrefour’s heels. The supermarket chain is scheduled to give us a trading update tomorrow.
It has been tipped before and is continuing to be a hot pick, thanks to its aggressive cost cutting to keep hold of customers who might otherwise be tempted to shop at other discount stores, despite strong competition pressures.
Recent Taylor Nelson Sofres data suggested a solid performance in May and UBS thinks the first quarter update should indicate that Tesco is on course for another profit increase this year. Capital Spreads has a rolling quote of 360.1-360.6p on the retailer.
Another relatively resilient stock during the crisis has been Barclays and news of the agreement to sell its fund management division, Barclays Global Investors (BGI) to US money management firm BlackRock, has prompted plenty of buying interest in the bank.
The news topped five days of steady gains in the share price, which tipped over the £3 level on Friday. Spreadex has a June-based spread of 294.7-296.7p.
The dollar is continuing to drop and commodity prices only seem to be going up at the moment. Together, these two trends have been particularly supportive of the mining sector stocks and gold miner Randgold Resources – which probably has the most direct correlation to the gold price of all the miners – is looking like a standout winner in the sector.
But there’s more to trading than simple speculation. To survive your trades, you need to consider effective hedges on your long mining positions. And you could do worse than short the FTSE future at 4,500 with a stop at 4,525 to hedge your long equity positions.