Market Report: FTSE 100 slumps below 5,000 on oil price fears

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The Independent Online

The FTSE 100 has crashed back through the 5,000 level which it passed amid fanfare less than two weeks ago. Worries over the soaring oil price and the wider global economy combined with a nervous feeling in advance of this morning's slew of profit figures to send the index plunging 44.4 points to 4,988.5.

The FTSE 100 has crashed back through the 5,000 level which it passed amid fanfare less than two weeks ago. Worries over the soaring oil price and the wider global economy combined with a nervous feeling in advance of this morning's slew of profit figures to send the index plunging 44.4 points to 4,988.5.

That was the index's worst one-day performance since November. Investors took their recent profits, worried that higher energy costs would impact on corporate profitability and disappointed that the large number of merger and acquisition rumours of recent weeks have failed to come to fruition.

MFI Furniture was 4.25p lower at 138.75p. The company has vainly been touted as a takeover target for private equity or for Kingfisher (the B&Q owner which was itself down 0.25p to 293p). Investors have noted some big sales on at MFI stores and worry that today's trading news will be poor. So much hinges on its January trading, and the idea that it might be slashing prices to shift unsold stock raised fears of yet another profits warning.

Other perceived bid targets also fell. EMI was off 2.5p at 225.25p; J Sainsbury fell 0.75p to 286p; Woolworths was 0.5p lower at 48.5p as Investec advised clients to sell, saying Apax Partners is unlikely to bid any higher than 55p, the top of a range that has already been rejected by the company. Singer & Friedlander bucked this trend, though, amid talk that managers from Kaupthing, the Icelandic bank which has built a 19 per cent stake, are in town.

Marks & Spencer, the joyless green giant of the high street, fell 7p to 367p as investors decided the putative bid from a mysterious South African private equity house was more than likely a hoax. Philip Green has also ruled himself out as a bidder, leaving the shares looking vulnerable to disappointing trading news, according to ING, which thinks yet more downgrades are likely. ING turned seller of M&S shares yesterday and upgraded the company's deadliest rival, Next, to a "buy". Next shares have fallen 7 per cent so far this year, ignoring its substantial long-term growth potential. Its stock ended up 7p at 1,577p.

No fewer than 16 blue-chip and mid-cap companies have results out this morning, and there were particular worries over the support services giant Rentokil Initial, whose margins have been under pressure and whose shares were off 2.75p at 154.5p yesterday, and over Avis Europe. The hire-cars business has been trading badly for 18 months and may need to be refinanced this year. Its shares reversed 1.25p to 57.5p.

Alliance & Leicester doesn't report until tomorrow, but the mortgage bank's shares dipped 20p to 904p after getting a savaging from analysts at CSFB, which believes the shares have been pushed too high by bid speculation. Any short list of bidders for A&L "would be very short", CSFB told clients.

Amid the small-caps, there were rumours of contract wins for Retail Decisions, the computer data security firm. And Oxford BioMedica, where merger talks collapsed this month, ticked a penny higher to 20p on hopes for receipt of another bid.

Things still look bleak for Minorplanet Systems, down 1.88p to 5.87p, which makes vehicle tracking gadgets. The loss-making company had to raise money twice last year, once in a placing at 21p a share, then via a loan from its major shareholder, GE Capital, and the chief executive, Terry Donovan. And it is still not enough. Recent sales have been disappointing and profitability still out of reach. Yesterday GE and Mr Donovan agreed to stump up a further £500,000 between them. The crunch date is 30 June, when they are due to be repaid.

Finally, new management is likely to be installed today at ML Laboratories, a perennially-underperforming biotech group. Rebel shareholders, led by the Jersey-based tycoon David Kirch, are demanding that Stuart Sim be replaced as executive chairman by a new team consisting of the serial biotech board member Ian Kent as chairman and Kieran Murphy, most recently boss of the private biotech Adprotech, as chief executive. ML has agreed to send Mr Sim packing with a pay-off of about £600,000 and has suggested two existing directors, Till Medinger and Paul Ballington, become chairman and chief executive, respectively.

Institutional shareholders held a conference call to discuss the rival proposals yesterday afternoon, and word is they were unanimous-but-one in supporting the outsiders to start a major cost-cutting drive. The Kirsh camp has withdrawn its threat to requisition an expensive shareholder meeting to force through their proposals, but one member said: "We expect ML to listen to shareholders for the first time. They don't have to, but what effect would that have on the share price?"

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