The US Federal Reserve’s emergency rate cut – the biggest in 25 years – helped markets rise mid-week and gave store groups a lift.

At last, general retailers bucked their dismal trend and outperformed the All Share index. The stores sector was helped by some good trading updates – in particular HMV and Morrisons – and, perversely, by the steepness of recent valuation declines, which has refreshed investor appeal.

Battered home and big-ticket retailers – such as ScS Upholstery and Kingfisher – were among the beneficiaries. Kingfisher was also helped by talk that US value investor Brandes may have increased its 5 per cent stake, while bid speculation prompted short-sellers to close their positions.

However, last week’s poor ONS retail sales data prompted Citi to warn that a “sizeable retail slowdown” was beginning. The broker said: “The severity of the consumer slowdown is likely to prompt the Monetary Policy Committee to cut rates sharply. But, with Consumer Price Index inflation likely to rise further above target, we expect that MPC easing will be gradual, rather than front-loaded.”

HMV’s Christmas performance impressed Pali International’s Nick Bubb, who moved from sell to neutral and upped the price target by 10 per cent to 110p. The broker said: “It would be wrong to get carried away but, despite obvious long-term threats, management have done a good job of reinvigorating the HMV business, growing market share and shifting the sales mix.”

Morrisons was up as it disclosed storming Christmas trading. Blue Oar Securities reiterated its buy message and increased its profit forecast from£550 million to£565 million. “We continue to compare and contrast the recovery stories at Sainsbury’s and Morrisons and favour Morrisons,” said analyst Greg Lawless.

Brokers took the hatchet to variety store group Woolworths, despite a likely return to retail profitability this year. John Stevenson of Shore Capital acknowledged that management had done well, but questioned how long a revival would last and was disappointed by performance at the entertainment division. Sell, advised Shore.

Hold Carphone Warehouse, recommended Deutsche Bank. The broker envisages a slowdown at the retail arm this year, with “negligible” growth in pre-pay. Deutsche cut its price target from 385p to 350p. Numis, with a 375p target, rated Carphone a buy and said the retailer’s high proportion of recurring revenues would allow it to weather a consumer downturn.

The Christmas update season is nearly over, but some of the big beasts have still to report. Of most interest next week will be bookseller and stationer WHSmith, expected on Thursday.

CHRISTMAS LIKE-FOR-LIKES: THIS WEEK’S FIGURES

COMPANY CHANGE % PERIOD

Associated British Foods (Primark total sales) 26% 16 weeks to January 5

Asos (sales) 86% Seven weeks to January 20

Carphone Warehouse (retail) 3.6% Four weeks of December

EBTM (online sales) 47% Four weeks to final Christmas shipment day

Flying Brands (total sales) 0% Six months to December 31

HMV (group) 9.4% Five weeks to January 5

HMV (UK & Ireland) 14.1% Five weeks January 5

HMV (Waterstone’s) 4% Five weeks to January 5

Home Retail (Argos) -0.2% 18 weeks to January 5

Home Retail (Homebase) -6.3% 18 weeks to January 5

Kesa (group) 1.7% November 1 to January 8

Kesa (Comet) 0.7% November 1 to January 8

Morrisons 9.5% Six weeks to January 6

Thorntons (own stores) 1.2% 14 weeks to January 12

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