Market Report: RBS takes a turn in the banking sector spotlight

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The Independent Online

A string of banking write-downs in recent weeks has had traders excitedly predicting the next victim of the credit crunch. Yesterday it was Royal Bank of Scotland's turn to take a twirl in the spotlight.

On a less-than-inspiring day for the markets – which slumped over 50 points before the LSE's technology systems packed up – talk focused on RBS potentially launching a rights issue, to strengthen its financial position, in the wake of the acquisition of ABN Amro. It fell 3.84 per cent to 438p.

Separately, a report from Sanford Bernstein noted that RBS and Barclays could have to write down a combined £6.5bn in profits this year. It added that their share prices had suffered heavily this year: "Concerns about liquidity, write-downs and reduced revenue expectations are weighing heavily amid a vacuum of hard information." Barclays was down 13p to 511p.

Later, there was vague talk that Morgan Stanley would announce a write-down. One analyst said: "The rumour mill is working overtime on the banks."

Leading the market down in the morning was the beleaguered power company British Energy Group, with shares blowing a fuse to close 7.21 per cent lower at 515p. Two weeks ago it fell 11 per cent after it had to close two reactors. Yesterday, it found further wire corrosion which analysts believe could keep the units offline for months rather than weeks. UBS backed Drax Group to benefit from the news, and it duly rose 2.64 per cent to 718p.

The FTSE 100 opened up but failed to cling on, falling 93.6 points. It rallied slightly until the markets were sent into uproar half an hour from the close as the LSE's systems went haywire. If some share prices in this column seem strange, this could be because of the ongoing glitches.

As the wheels came off in London, the Dow was spiralling ever downwards, about 133 points lower at 4.30pm.

The retailers took a bit of a spanking, with Next the worst affected as its October sales figures disappointed investors. The group fell 6.73 per cent to 1914p as it showed a 2.9 per cent decline in third-quarter sales and a cautious outlook.

As the market ran for cover, investors found some shelter down the mines. As commodity prices rose, so did Big Mining, with Rio Tinto topping the leaderboard in the morning. The stock weakened but still closed in positive territory up 0.37 per cent to 4350p by yet more talk of the exceedingly unlikely bid from BHP Billiton.

Shares were revving in Rolls-Royce Group as it landed an $800m contract from the International Lease Finance Corporation to provide Trent XWB engines to power a fleet of 20 Airbus A350s. The group motored 1.36 per cent higher to 523.5p.

The continued rise in oil prices boosted the sector blue-chips with BG Group the highest, up 0.95 per cent to 905p.

Topping the mid-tier was the auction group QXL Ricardo, which saw buyers pour in after revealing it was the focus of a takeover bid. The group rose 15.23 per cent higher at 1740p after confirming it had received a preliminary approach.

The bluetooth group CSR also enjoyed support after a solid set of third-quarter numbers. It roared up 14.49 per cent after boosting revenues by 12 per cent to $240.1m. The stock endured a torrid summer as it fell from 905p to as low as 582p, but closed up yesterday at 675.5p.

It proved another day of losses for the mid-tier asset managers, with New Star Asset Management again down, 7.23 per cent lower at 288.75p. It was later overtaken by Rathbone Brothers which finished 8.5 per cent lower at 1195p.

Another stock to suffer was FirstGroup, as it posted interim numbers. Shares in the transport company were down 6.29 per cent to 745p as it announced the expected 12 per cent rise in operating profits to 103.1m.

One of the principal risers among the small caps was the orthopaedics group Anthro Kinetics, which leapt 44.44 per cent to 13p as it received approval from the US Food and Drugs Administration for its radio frequency technology. The decision will widen its presence in the US.

Central African Mining & Exploration Company was celebrating some good news as it announced a joint venture with Prairie International in the Democratic Republic of Congo. Rumours that it was set to secure its once-revoked mining licences in the country also helped it up 18.52 per cent to 40p.

Elsewhere, Synexus Clinical Research has accepted an £18.1m bid from Sigma Acquisitions, sending it up 23.58 per cent to 76p.

The small-cap fallers were littered with companies warning on profits. The worst performer was OCZ Technology Group, which fell more than half to 65.5p after admitting that full-year profits would be below market expectations.