Institutions step in to temper the Greenspan factor

MARKET REPORT

It was the day Alan Greenspan nearly did it again. In December comments by the US Federal Reserve chairman's about the "irrational exuberance" of the markets prompted an immediate sell-off in shares on both sides of the pond.

That attempt to stop a raging bull market in its tracks failed as share prices quickly resumed their upward path.

Yesterday Mr Greenspan had another go, with some success. In testimony to the US Senate, he hinted that US interest rates may have to go up to check inflation and questioned the sustainability of recent stock market strength.

In response Wall Street dropped by over 100 points in early exchanges and London fell in sympathy, hitting a low of 4,316 before institutional buyers emerged to leave the FTSE-100 15.4 points adrift at 4,329.3.

Company results again provided the main focus for dealers. Standard Chartered firmed 13.5p to 783.5p after posting 1996 profits at the top end of the range and raising its dividend by almost a third. SBC Warburg and SocGen were among the many brokers making positive noises about the investment bank.

Insurers were a mixed bag. Profits in line with market expectations saw the Prudential Corporation hang on to a 4.5p gain to close at 567.5p, but Commercial Union finished 24p weaker at 666p amid disappointment that its stated net asset value of 545p was 55p below forecast. Guardian Royal Exchange was the weakest blue chip, down 10p at 273.5p on further consideration of this week's results.

GRE's apparent enthusiasm for acquisitions, coupled with its relatively large exposure to UK motor insurance business, makes the shares a sell according to Japanese broker Nikko.

Barclays, 5p better at 1,127p, was the most active stock with over 35 million shares changing hands as brokers Cazenove and BZW went into to the market to buy back some of the bank's shares for cancellation.

Away from financials one of the main talking points was Grand Metropolitan, down 16.5p to 273.5p on fears of a burger price war being sparked by McDonald's' reported decision to slash the price of Big Mac from $1.90 to just 55 cents in a bid to jump-start sales. Last year McDonald's operating profits in the US fell by 9 per cent. John Wakely, analyst at Lehman Brothers, thinks McDonald's renewed focus on value - code for price cuts - could cost Grand Met's Burger King pounds 15m both this year and next.

That, he argues, raises the question of why Grand Met needs to own Burger King at all, not least because it offers no synergies with the rest of the food and drinks conglomerate and offers investors little or no upside.

As a result, Mr Wakely expects pressure for a Burger King spin-off to mount. One possible outcome is that if capital gains tax problems on disposal can be solved Grand Met could spend up to pounds 2bn raised from a trade sale on buying back its own shares.

Leading media stocks were weak on vague talk that the proposed digital terrestrial television alliance between BSkyB, Carlton and Granada may run into regulatory problems. BSkyB is also facing a revolt from several pub chains about the price it charges them to screen live Premier League football matches. BSkyB ended 10p lower at 610, Carlton closed 16.5p off at 460.5p while Granada eased 2.5p at 815.5p.

But the day's booby prize went to Pace Micro Technology. News of a second profits warning this month and the sudden resignation of joint chief executive Barry Rubery sent the shares crashing 71p to 86p. The shares were as high as 241.5p as recently as November. Volume was a hefty 19.5 million shares.

Traders expect the shares to bounce this morning on hopes that a contract to make at least 150,000 digital set-top boxes for BSkyB will still be awarded.

Merrill Lynch cut shares in paper maker David S Smith to ribbons as the broker slashed its forecasts to reflect cheaper continental paper prices.

The shares hit a year low of 252p, down 6p as Merrills noted that prices for testliner and corrugated board are about 20 per cent cheaper in Germany than the UK, causing significant import pressure for domestic producers such as Smith. The strength of sterling is another worry.

As a result the US broker has lowered its pre-tax forecast for this year by pounds 15m to pounds 85m and trimmed the 1998 estimate back by pounds 20m to pounds 115m.

Newcomer Aortech, the artificial heart valve manufacturer, made an pulsating stock market debut, closing 13.5p above the125p placing price.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want for the fitness tech, or the style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own