Market Report: All-round gloom sends Footsie down 50 points

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The Independent Online
SHARES slumped yesterday. Fears that interest rates will be forced higher and the recession will deepen even further sent the FT-SE share index crashing 51.5 points to 2,431.9.

It was the biggest one-day fall since the Chancellor Norman Lamont's poorly-received Budget in March, when Footsie lost 52.4 points. In August last year the index dived 80.5 points as the unsuccessful attempt to oust Mikhail Gorbachev, the then Soviet president, rocked world markets.

But share trading was again thin. Much of the damage was caused by market-makers attempting to take evasive action by lowering prices in a bid to deter sellers.

To some extent they succeeded. But towards the close their defensive ploy was undermined. Some determined selling in a market already in retreat made the falls even steeper.

New York made a significant contribution to the gloom. Poor US trade figures unsettled Wall Street. So did lower-than-expected figures from the IBM computer giant. With the already fragile hopes of a US recovery under renewed pressure the Dow Jones average had fallen more than 30 points when London closed.

The German interest rate move on Thursday had shares on the retreat from the opening bell. Then the Cheltenham & Gloucester Building Society stunned the market by nudging up its mortgage rates, thereby confirming fears that UK interest rates are under pressure.

Other building societies are likely to follow. Abbey National, the former society now a bank, said it had 'no immediate intention' of hoisting its rates. Its shares fell 12p to 276p.

The stock market, with the recession likely to linger into next year, had been hoping for lower interest rates.

The German moves indicated that there could be a struggle merely to hold them at the present high level. The building societies' need for more cash is seen as underlining the danger of the Government suffering the embarrassment of being forced to lift base rates.

The falls were indiscriminate. Few blue chips escaped. Building and building material shares, already battered this week, suffered another demoralising session. Interest rate-sensitive shares, particularly stores, were badly mauled.

The now daily raft of profit and dividend downgradings had taken their usual toll even before the full depth of the depression increased the falls.

Nomura lowered its Ladbroke Group expectations from pounds 225m to pounds 212m for this year and from pounds 275m to pounds 255m for next. The shares ended 12p down at 183p.

Barclays de Zoete Wedd was active. It sliced its forecast for its Barclays parent from pounds 395m to pounds 320m and from pounds 975m to pounds 785m and indicated this year's dividend would not be increased as it had earlier expected.

It also lowered its National Westminster Bank prediction from pounds 500m to pounds 400m. Lengthening bad debts were responsible for the revisions.

Tate & Lyle also collected a BZW downgrade and the securities house lowered its asset estimate for the oil group Lasmo from 150p-160p a share to 130p.

Barclays fell 12p to 315p, NatWest 17p to 317p, T & L 16p to 339p and Lasmo 19p to 125p. Datastream calculated that the meltdown wiped more than pounds 10bn from the market's value. The FT-SE index is now at its lowest since the Tories retained power in April. It is nearly 50 points above its year's low, hit in April.

Northern Foods, which has enjoyed something of a love affair with the market recently, fell 18p to 603p as Hoare Govett fretted about a slowdown in milk profits. Analyst Richard Workman may lower his pounds 165m profit forecast for this year.

Amid the mayhem MFI, the furniture stores group, almost achieved a remarkable debut. Although the flotation price was cut to 115p the offer still flopped. Yet the shares touched 119p before closing at 117p.

Even Mirror Group Newspapers fared a little better than expected. Against suggestions of a 40p to 45p level, the shares closed at 52.75p in brisk trading.

Best performing shares were the old faithfuls such as utilities. Gold shares also advanced.

Wellcome slipped only 7p to 870p, which must have improved the prospects for its tender share offer.

Airtours, last year's best performing share, held at 205p. Despite difficult conditions the group appears to be trading well and Hoare Govett expect profits of pounds 38m this year against pounds 27.5m.

Lonrho dipped 1p to 84p. Genting, the Malaysian gaming group, has disclosed a 3 per cent interest. It believes the shares are undervalued.

Morland, the Thames Valley brewer, may yet achieve a Houdini-style escape from Greene King. Yesterday, shareholders with 88,774 shares, representing 0.42 per cent, withdrew their acceptances of the bid. But the bidder picked up 25,000 shares in the market. Greene King, which started with 43.4 per cent, has managed to lift its stake to only 47 per cent.

Lloyds Chemists suffered with the rest of the retail pack - down 31p to 229p. The shares have been particularly weak lately as fears have grown about expansion. The acquisition of 89 CTN shops, seemingly for conversion into chemists, has increased anxiety. Kleinwort Benson worries about Lloyds staying in the CTN market. The shares were 373p earlier this year.

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