Merchant stock downgraded
Published: 30 June, 2010
LONDON: Share prices on the FTSE made a slow recovery this morning after yesterday's huge fall. In the past six trading days the FTSE 100 lost about 380 points, wiping almost £100bn off the value of Britain's top companies.
Fears that government austerity packages will hinder global growth have combined with fresh anxiety about the health of European banks to hammer investor confidence.
But merchant shares had already come under pressure following the budget's VAT increase: Travis Perkins was of those downgraded to reduce from hold.
Last week, Morgan Stanley, responded to the VAT rise announced in the budget by downgrading general retailer shares.
The broker's analyst, Graham Secker, said that because the tax was going up to 20%, "our preferred trade is to sell general retailers and buy food retailers, as consumers have less discretionary income going forward". General retailers had outperformed food stores when VAT was slashed to 15%, Secker said.