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Market report: Ocado shares climb further on blue-chip hopes

Tom Rees
Ocado shares have skyrocketed since it started securing international deals - REUTERS

OCADO’s late attempt to secure a place in the FTSE 100 in next week’s index shake-up gathered pace after Wall Street analysts urged investors to snap up the stock in the wake of its transformational deal with US grocery giant Kroger.

The FTSE 250 firm soared 44pc last Thursday after a milestone deal with $20bn-valued Kroger, its fifth and largest international tie-up to date.

With the index’s quarterly reshuffle just a week away, Ocado’s surge in the last week has made it an unexpected contender for promotion to the blue-chip index.

Lifting its price target for Ocado to £10.20, Bank of America Merrill Lynch argued that it had “developed a credible and profitable alternative to Amazon’s threat”. BAML added that execution was now the priority for investors with its project with French supermarket giant Casino “moving smoothly and faster than expected”.

Traders said that hedge funds were continuing to propel the company higher by rushing to close short positions betting on a share price fall. Yesterday’s 73.4p, or 9.2pc, surge to 873.4p boosted Ocado’s market valuation to £5.4bn, putting it in contention for promotion in a tight-run race.

Meanwhile, Marks & Spencer’s last-ditch attempt at avoiding relegation to the mid-cap index was boosted by appointments to its board lifting it 8.7p to 300.4p. G4S rallied 5p to 272.5p on Kepler Cheuvreux initiating coverage of the security outsourcer with a “buy” stamp but it is likely to be too little, too late to stop the company falling out of the index.

Elsewhere, Russian miner Evraz tumbled to the bottom of the FTSE 100 leaderboard amid reports that boss Roman Abramovich’s UK investor visa is yet to be renewed by the Government. Credit Suisse analysts piled on the pressure, delivering the steel producer a double downgrade from “outperform” to “underperform” on concerns over its high share price. Gambling software company GAN raised £7.5m from investors to tap the US’s liberalised sports betting market.

A relief rally following the announcement of a trade truce between the US and China propelled global stocks higher. With the pound slipping to its lowest level against the dollar in 2018, the UK’s blue-chip index outperformed its peers. The FTSE 100 jumped 89.33 points to 7868.12, a record intraday high, before ending 1pc up at a new closing high of 7,859.17.

The Dow Jones in New York touched above 25,000 points for the first time in two months, while the price of soya beans, which were targeted on China’s tariff hit list, surged 2.3pc on the thawing tensions. With Italy’s populist parties reportedly poised to install little-known technocrat Giuseppe Conte as prime minister, the sell-off of Italian assets spilt over into the new week.