Supermarket shares slide after Amazon-Whole Foods deal
U.K. stocks on Friday broke a four-day losing streak, boosted by the index's oil and gas shares as crude prices rebounded from a seven-month low.
Sharp drops for supermarkets shares, however, curbed gains for the benchmark index after Amazon.com Inc.'s (AMZN) move to buy Whole Foods Market Inc (http://www.marketwatch.com/story/amazon-to-buy-whole-foods-for-137-billion-2017-06-16-91035726).(WFM) sparked concerns of increased competition in grocery market.
The FTSE 100 ended 0.6% higher at 7,463.54, paring its weekly loss to 0.9%.
The energy group, which has a roughly 14% weighting on the benchmark, rose as oil prices gained ground, including a 0.6% rise for Brent crude futures . Shares of oil producer BP PLC (BP.LN) (BP.LN) added 1.2% and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) ended 1.6% higher.
Retail upset: U.K. grocers posted the biggest losses in the FTSE 100 after Amazon announced a $13.7 billion takeover of upscale grocery chain Whole Foods.
"Whole Foods has a limited presence in the U.K. so the direct threat may seem limited. But Amazon's reputation as a market-share gatherer and price-crusher precedes it. The market will shoot first and ask questions later," said Russ Mould, investment director at AJ Bell.
"Amazon's strategy is yet to be defined but its work with drone delivery and subscription plans in other parts of its business mean it is possible to draw conclusions which suggest the U.K. grocery market is going to become more competitive still," he added.
Shares of J Sainsbury PLC (SBRY.LN) lost 3.9% and Marks & Spencer Group PLC (MKS.LN) (MKS.LN) gave up 1.9%.
Read: European grocers crumble after Amazon-Whole Foods deal fuels pricing concerns (http://www.marketwatch.com/story/european-grocers-crumble-after-amazon-whole-foods-deal-fuels-pricing-concerns-2017-06-16)
Tesco PLC (TSCO.LN) (TSCO.LN) lost 4.9%. Britain's largest supermarket chain had already traded lower earlier in the session after rising more than 4% when trading opened. That was after first-quarter same-store sales at its core U.K. unit grew by 2.3%, (http://www.marketwatch.com/story/tescos-uk-sales-rise-23-on-food-boost-2017-06-16) and Tesco said it's working with suppliers to offset the impact of inflation.
Bucking the negative trend among the grocers, shares of Amazon's U.K. partner Wm. Morrison Supermarkets PLC (MRW.LN) rose 1.1%.
"If anything [the deal] could support Morrisons if it signals how Amazon might be able to help it grow market share," said Neil Wilson, senior market analyst at ETX Capital, in a note.
Weekly wrap up: In other moves Friday, Rolls-Royce Holdings PLC (RR.LN) climbed 1.4% after the aircraft engine maker kept its underlying outlook (http://www.marketwatch.com/story/rolls-royce-holds-to-outlook-excluding-fx-effects-2017-06-16) for its half-year and full-year revenue, profit and free cash flow unchanged.
On the downside, telecom company BT Group PLC (BT.A.LN) fell 0.8% and miner Anglo American PLC (AAL.LN) lost 2.8%.
Meanwhile, U.K. Prime Minister Theresa May and her Conservative Party were still reportedly discussing a deal for support from Northern Ireland lawmakers after the Conservatives lost their parliamentary majority in last week's general election.
"The political situation in the U.K. seems to be improving, as the Queen's speech will take place on Wednesday, even if the Conservatives don't have a deal in place with the Democratic Unionist Party by then. This sign of political stability has added to the boost in investor confidence," CMC's Madden said Friday.
Brexit talks are set to begin Monday between U.K. and European Union officials.
The pound fetched $1.2777 on Friday, up from $1.2756 late Thursday in New York.
(END) Dow Jones Newswires
June 16, 2017 12:14 ET (16:14 GMT)