On a second day of the market being smashed by the Northern Rock runaway train, traders spent much of the day guessing who would be next.
There were only a handful of stocks limping into positive territory by the end of the day. After a recurrence of takeover talk Sage Group topped the list, up 2.77 per cent to 250p. There had been speculation last week that Infosys was set to bid, but the name doing the rounds last night was Cap Gemini. Sage was bolstered by a bullish note from Deutsche Bank. The broker said: "Sage represents a safe haven in our view in the context of the sector and the valuation is undemanding."
Unsurprisingly, top of the fallers was Northern Rock as last week's tailspin intensified. The bank, whose shares were valued at more than 1200p seven months ago, lost 40 per cent of its value at one point, before staging a slight rally. The brokers deserted in droves with Dresdner Kleinwort, Lehman Brothers and Citigroup all slashing their price targets. Prize for the riskiest call goes to Goldman Sachs, which released a note yesterday morning saying: "We believe that this news will be taken negatively and that questions are likely to be raised regarding the business model." Northern Rock closed down 35.45 per cent at 282.75.
Not far behind was Alliance & Leicester which fell almost a third to 600p as rumours did the rounds that it would be the next on the list to ask for help. One trader said: "This has been massively oversold in my view."
Simon Denham, managing director of spreadbetter Capital Spreads, said the banking sector heavy weighting meant all eyes were on the next domino to fall. He said: "If a bank with absolutely no actual bad debt can effectively go under, a whisper here or rumour there may do the same for a much bigger fish if the Bank of England is not careful."
There were few risers as investor fears over the banking crisis dragged the market down. The FTSE 100 slumped 106.5 points to close at 6,182.8. Another sector to suffer was the retailers with Home Retail Group the worst hit, down 5.76 per cent at 376.5p.
Investors were tucking into Northern Foods, which soared off the back of a note from Panmure Gordon. The broker said Northern looks set to transform its returns to investors with the focused portfolio, a new management approach and an active focus on capital management. It raised its recommendation to "buy" backing, which sent the shares up 4 per cent to 97.5p. At the other end of the scale, Gyrus Group slumped 8 per cent after it missed estimates on its interims. Adjusted operating profits were up 2 per cent to £17.5m after manufacturing efficiencies and a hit from the weakness in the dollar.
One stock that came into potential takeover focus once more was SIG, whose shares slumped 121p in early morning trading.
Traders were backing the construction company as a strong buy yesterday, saying the stock had been oversold - the losses were rumoured to be a forced seller due to a stop loss being reached - and on talk of potential interest from Saint Gobain, which had first done the rounds before the summer. The stock rallied, helped by the chief executive and financial director buying shares, and it closed down 15p at 1146p
The property sector is also feeling the pinch of the recent turmoil, and Merrill Lynch's downgrade of Minerva to "sell" from "buy" did indeed spark a sell-off. The broker said the group has been slow to de-risk its London property projects. The stock closed at 230.75p. One trader said: "There is definitely value there, but at the moment no one is willing to chance their arm."
Among the small caps, Playwize hit the jackpot after signing a deal to provide Ladbrokes with its online 3-D poker system. Shares in the tiny software developer doubled, closing 1.25p higher at 2.5p, the top of the growth stocks.
Another riser was Target Resources a diamond and gold mining company in Sierra Leone. Despite the country being the setting for last year's Blood Diamond, it was an entirely different film that had investors piling in, as it signed a deal with Tiffany & Co. Holly Golightly's favourite jewellery store agreed to invest $5m in Target, saying it was part of its strategy to invest in companies that "ethically mine high quality stones". Target rose 13.33 per cent to 25.5p.
Elsewhere, while Central African Mining rebounded after its recent problems in the Democratic Republic of Congo, Brinkley Mining went the other way. It closed down 25.37 percent at 12.5 on speculation the government was set to revoke its uranium mining licenses.
Today sees Kurawood on AIM. The company which treats softwood to create the consistency of hardwood, has raised £4.5m, to debut with a market cap of some £17m.Reuse content