No enthusiasm in FTSE stocks as UK's June retail sales miss estimates

No enthusiasm in FTSE stocks as UK’s June retail sales miss estimates
By Ipek Ozkardeskaya

The FTSE made a bullish start in London following encouraging financial results from Unilever released before the open, yet has thus far failed to extend those gains.

6650 continues as a supporting level, a break below this level could rapidly push towards 6520. The recent appreciation in pound and the Bank of England preparing to increase the benchmark rates is an extra weight on investors’ appetite. The unexpected 0.2% contraction in June retail sales should be a drag for an setback above the 6745p mark (200d MA). Year on year, however retail sales have still increased 4%.

Capital flow is steady into the defensive sector today with Kingfisher, Persimmon and Wolseley all in positive territory; the UK miners trimmed losses with Randgold and Anglo American above 1% in early London trading. As the market revised down the Anglo American’s EPS by 1.90% over the past four weeks, hopes for higher sales in the first half of the year has certainly not been enough to bet for satisfactory profit given that the commodity prices took a serious hit since the beginning of the year and the debasement in the commodity markets is still a developing story.

Unilever boost hope, Shire under watch

Unilever beat the sales estimate and released a better-then-expected EPS. Following the sharp 20% fall in Chinese sales in the last quarter of 2014, the improvement in sales performance in China and EM during the first half of this year has already sent the share price to all-time high of 3087 in April 21st 2015. The stock price has retreated by more than 7% since then. The market has the potential to absorb further upside correction. Given the potential recovery in global growth, a positive take on Unilever is maintained with a call for upside in line with an average target price of 2945p on company’s potential to expand business in China thanks to a recent deal reached with Alibaba. While Alibaba deal will allow the UK giant to have access to Chinese rural market and e-commerce data, the slowdown in Chinese growth and the gloomy outlook in Brazil are prevailing downside risk to business growth.

Shire reports at 1200BST. Shire’s first quarter sales and revenues have been encouraging and rumours on a potential takeover of Swiss Actelion just a couple of weeks ago revealed solid potential for buyers with 16 analyst out of 23 in favour of buying the stock versus 6 hold with a minimum gain targeted at 6000/6070p mark. Only one analyst would sell. Although we did not hear more about the Actelion deal, the Shire’s appetite to expand activity should bring new names on the wire.