Market report: Morrison woes deepen as institution sells stock

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There was further misery for shareholders in William Morrison Supermarkets yesterday, with the share price taking another lurch downward as one big institutional shareholder bailed out of the stock.

There was further misery for shareholders in William Morrison Supermarkets yesterday, with the share price taking another lurch downward as one big institutional shareholder bailed out of the stock.

The Bradford-based group, whose botched integration of Safeway prompted the first profits warning in its 37-year history last week, fell a further 4p to 187.5p, taking its three-day slide to 37.75, or 17 per cent.

Dealers heard that ABN Amro was placing a giant line of stock, said to be about 33 million shares, on behalf of one of the the stock's long-standing institutional backers. Several fund managers, including Newton Investment Management, Baillie Gifford and M&G, have stakes of about that size.

Investors were also bracing for miserable news from the banking sector. Recent trading updates have shown cut-throat competition and narrowing margins, and brokers are starting to focus on the forthcoming slew of interim results. A major theme this year: money market interest rates, at which the mortgage banks borrow to lend to their customers, have been rising fast in advance of the Bank of England's monetary tightening, but the lenders have to wait until actual base rate rises before passing on these higher costs.

Northern Rock is always first out of the trenches and has its half-year figures scheduled for 20 July, so its shares were first in the firing line yesterday. It also has the highest ratio of mortgage lending to customer savings, so it is most exposed to the margin squeeze. Its shares fell 10.5p to 693p on fears of a profits warning and after downgrades from UBS and Citigroup. Bradford & Bingley fell 3.25p to 264.75p and Alliance & Leicester dipped 12p to 813.5p. And some of the recent takeover speculation faded at Abbey National, which fell 2.25p to 485.5p. Investors are beginning to fret that even a giant programme of cost savings could not justify a Spanish or US bidder paying the current share price.

With 10 banks accounting for 23 per cent of the FTSE 100 by market value, and none of their shares rising, there was no way the blue-chip index was going to end higher. It closed at 4,370.7, off 32.6 points. The volume of trading was poor, an absence of buyers making the market "soggy", according to dealers. US stocks were also in the red as London closed, and with the Nasdaq particularly badly hit thanks to a couple of profits warnings, UK tech stocks suffered. The software house Sage, the only FTSE 100 tech stock, dipped 4p to 177.75p, while Spirent, the telecoms-testing equipment group, was bottom of the mid-cap performance league, off 4.5p at 62p.

Traders were also unnerved by the latest uptick in the oil price, which hit its highest level for a month after a pipeline rupture disrupted supplies from Iraq. Airlines facing higher fuel bills went into a tailspin, with British Airways off 6.5p at 263p and Ryanair dropping 2 cents to ¤4.72. And easyJet collapsed to an all-time low of 150p, 8p lower on the day, as talk of a bid from its founder, Stelios Haji-Ioannou, was discounted.

Talk of a profits warning to come at JD Wetherspoon unnerved investors in the discount pub chain. It is likely to have again missed out from the upsurge in drinking over Euro 2004, since most of its outlets don't have televisions. Meanwhile, it is also facing pressure from the Government to raise prices to curb binge drinking. Its shares were off 7.75p at 276.25p, in contrast to sectormates such as Greene King, the pubs and brewing group, whose shares were up a further 25.5p at 1.021p on last week's strong trading news, and Luminar, the nightclubs group, whose AGM statement was not quite as gloomy as predicted and whose shares danced 18p higher to 418p.

Reuters fell 14p to 338.75p after Morgan Stanley abandoned its positive stance on the stock. The financial information group's shares have enjoyed upward momentum since brokers began improving their sales and profit forecasts at the end of the investment banking spending freeze. Morgan Stanley's fear is that any upgrades are going to be more modest.

Shares in Plant Health Care, whose organic fertilisers are used on the West Ham FC pitch, joined AIM after raising £7m yesterday, closing at 56.5p, up 4.5p from its placing price. And two recent debutants moved higher after their first updates for investors: Polaron, which makes microscopes able to see atomic structures, rose 7p to 164p after cost savings led its broker to double its earnings forecast for the year; and Biofuels Corporation said construction work had commenced on time for its new Teesside biodiesel plant, sending shares up 2p to 71p.

Royalblue, whose software is used by traders in the financial markets, gave up early gains to close flat at 515p amid fears over a legal dispute. And Brewin Dolphin, the stockbroker, dipped 5.5p to 68.5p after reports it is facing a £30m fraud claim.

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