Market Report: Wall Street retreat gives Footsie the jitters

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Risers were few and far between on the London market as only nine FTSE 100 stocks ended the day in positive territory.

Yesterday's fall of 84.4 points in the blue-chip index was the worst day of trading in more than four months. A grim opening on Wall Street, with the Dow Jones down 92 points by the time the UK markets closed, further dampened spirits in London as the internet search giant Google warned of slowing growth.

Vodafone continued to be sold heavily, as Monday's announcement that the company would write down £28bn of goodwill continued to harm sentiment. Shares in the mobile telecoms group fell 4.5p to 109p, amid increasing pressure on the chief executive Arun Sarin.

Many traders feel he has outstayed his welcome and new leadership is required at the world's largest mobile telecoms operator if the rot is to stop.

Among the other leading fallers were defence group BAE Systems, down 14.75p at 420p, the satellite broadcaster BSkyB, off 17.5p to 505p, and the insurer Prudential, down 19.5p to 603p.

The financial data and news provider Reuters continued where it left off yesterday, by falling 18p to 380p, a 4.5 per cent decline. Last Friday's poor earnings outlook has taken its toll on the stock, pushing it down 17.5 per cent from its pre-announcement high of 460.75p.

Brokers have been in a rush to slash 2006 forecasts for Reuters. Credit Suisse First Boston downgraded its recommendation on the stock from overweight to neutral yesterday, after UBS did the same last week. One trader said: "It is very difficult to see where any good news is going to come from in the short term. There are a lot of short positions in the market and we are not seeing many being closed yet. This could have plenty more downside left in it."

Alliance & Leicester added to the gloom by falling 56p, to close 5 per cent lower at 1,069p. The mortgage bank reported an uninspiring set of numbers yesterday, and many observers feel the takeover premium in the price is making the stock look expensive. One analyst said: "Alliance & Leicester stock has been the subject of takeover rumours for some time, meaning that it now trades on a multiple that is simply not justifiable in comparison to the rest of the sector."

Among the few bright spots in the list of leading shares was Royal Bank of Scotland, driven higher after announcing good res-ults and a 25 per cent increase in its dividend. RBS shares topped the list of risers, adding 50p to 1,919p. BAT was the only other leading stock to add more than 0.6 per cent, as the cigarette maker climbed 31p to 1,359p on the back of better-than-expected 2005 results.

Most of the best performers were among the second-line stocks, with GKN, Hays and St James's Place Capital reporting pleasing results.

Plugging gaping holes in pension funds has been a feature of the week so far; investors and analysts alike reacted favourably to GKN's announcement that it would inject £220m into its pension fund as well as accelerating its restructuring programme. Its stock rocketed on the news, rising 23.25p to 339.75p, a 7.4 per cent gain.

Meanwhile, Hays added 9.5p to close at 148p and St James's rose 17.5p to 320p as the fund manager reported a 63 per cent rise in pre-tax profits for 2005.

There was a mix of news in the smaller mining and oil stocks. Biofuels fell 12.5p to 160p as the house broker Collins Stewart Tullett confirmed the company would not reach capacity at its Seal Sands biodiesel plant until the fiscal year 2007-08. This came despite the company saying production had started on time.

Aurum Mining, another AIM-listed stock, rallied 9p to 64.5p as the small-cap entrepreneur Nigel Robertson sold his stake. The feeling among traders and market makers is that knowledge of the sale has held Aurum shares back, and that the overhang clearing will start the stock moving in the right direction.

The worst performer of the day was the oil exploration and production minnow Elixir Energy, as the company announced that its Jaguar well in the North Sea holds no recoverable reserves and will be capped. Its shares tumbled on the news, losing 19.75p to close at 26.25p, a fall of 42.9 per cent. The house broker Ambrian said there is still a lot for the company to go for, as the Jaguar well was just one of 25 targets the company has a license for, as the analyst Zac Philips maintained his buy recommendation on its shares.

All of which made it perhaps not the best day for Clean Air Power to float - the company was placed by Canaccord Adams at 100p, and although it reached a small premium, closing at 102.5p, the dual fuel technology group was unable to match the performance of recent listings.

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