Supermarket shares hit by Amazon deal

Shares in some of the UK's leading supermarkets fell sharply on the news that online retail giant Amazon is buying upmarket grocer Whole Foods.

The announcement sent ructions through the retail sector, with Tesco shares sinking 5% and Sainsbury's down 4%.

Marks and Spencer, which also has a sizable food business, fell 2%.

Neil Wilson at ETX Capital said the deal was "yet another signal of the seismic shift in the market caused by the Amazon model".

Shares in Morrisons, the UK's fourth-largest supermarket chain which has its own tie-up with Amazon, fell sharply at first before recovering to close 1% higher.

"Whole Foods has just nine stores in the UK so the impact on Morrisons... should not be too significant, and if anything could support Morrisons if it signals how Amazon might be able to help it grow market share," Mr Wilson said.

The FTSE 100 share index closed up 44.18 points at 7,463.54.

Away from the retail sector, shares in Rolls-Royce rose 1.4% after the engineering group said it had made a good start to 2017, with "all businesses performing in line with expectations".

The company also revealed that the weakness of the pound was set to lift revenues by £400m and profits by £50m. The drop in the value of the pound since the Brexit vote means that Rolls-Royce's dollar earnings are worth more when converted back into sterling.

On the currency markets, the pound rose 0.2% against the dollar to $1.2787, but slipped 0.16% against the euro to 1.1424 euros.