Market report: Rolls-Royce suffers as aircraft orders dry up

Thursday 21 August - 4pm update

Rolls-Royce shares lost out today as broker sentiment soured against the aircraft engines maker.

Evolution Securities issued a damning note on the company despite recent strong results and the announcement of a joint venture with US firm Goodrich.

With gloomy news pouring out of the aviation sector, and passenger numbers falling even in the former major growth markets of China and India, analysts are expecting orders for aircraft to sink.

Evolution predicts Rolls-Royce's customers will defer deliveries of orders they simply cannot afford in the coming months and that, with a growing number of airlines likely to go bust, the future could prove even more challenging.

It was the second-biggest casualty among blue-chips, off 10½p to 366p.

Shares recovered from early losses in another day of incredibly thin trading, with the benchmark FTSE 100 rising 3.2 points to 5375.

Meanwhile, fears that shoppers are deserting Marks & Spencer's stores sent investors rushing for the exits.

The former darling of the High Street said yesterday that it is bringing forward its next trading statement by a month, fuelling talk that Sir Stuart Rose will report another slump in sales. The move came after figures out this week showed an 8% drop in food sales during the four weeks to 8 August as budget retailers tempted customers away from M&S's more expensive offerings.

Analysts warn Marks & Spencer is in danger of becoming the most high-profile victim of the consumer downturn, sending its shares tumbling 4¼p to 247¾p.

Talk of a bloodbath on the High Street has sparked worries that even Primark, the cut-price clothes retailer, could come under pressure.

Citigroup advised clients to rid themselves of shares in owner Associated British Foods, and slashed its target price from 850p to 700p ahead of its trading update in September, saying the bleak conditions on the High Street will test even Primark's business model.

But it is its food division that Citi is most scathing of, warning that despite ABF's bullish comments, rising energy and sugar beet costs are likely to hit its performance hard. The gloomy assessment sent the shares south, shedding 13½p to 769½p.