Market Report: Footsie takes biggest fall since '87

FOOTSIE TOOK a massive tumble yesterday as a combination of American gloom, profit-taking and bearish economic sentiment conjured up the biggest fall since the crash of 1987. The blue-chip index looked like a well-lubricated City worker at the end of the office Christmas Party, staggering aimlessly for a while before falling flat on its face.

The main index finished a punch-drunk 206.4, or 3.6 per cent, lower at 5537.5, after breaking through the psychologically important 5,700 and 5,600 barriers. The biggest push by far came from Wall Street, which plunged 200 points overnight. Hong Kong and Tokyo also did their bit to corrode confidence and when London opened its fate was sealed.

Profit-taking set in, buoyed by the feeling that the market had been overbought in recent times. A gloomy CBI survey on services gave further ammunition to the sellers and red became the colour of choice among City screens. The mid and small cap fared relatively better but were still nursing big losses. The FTSE 250 closed down 80.3 at 4821.4, while the Small Cap shed 25.5 to 2039.5.

Financials were caught in the eye of the storm as the recent outperformance whetted the profit- takers' appetite. Amvescap took the brunt of some heavy selling. Fears over its exposure to melting global markets took 41.5p off the shares, which closed at 452p.

HSBC suffered from the Hang Seng's weakness and a downgrade from Credit Lyonnais. The final deficit was 104p to 1,536p. Standard Chartered was also on the receiving end of the Hang Seng/ Credit Lyonnais double whammy and crashed 17p to 627p.

The domestic banks fared little better. Royal Bank of Scotland, down 57p to 856p continued its rotten run ahead of tomorrow's results. The market is worried about bad debts. Its neighbour Bank of Scotland fell 39p to 631p in sympathy.

Lloyds TSB, still hot favourite for a takeover of Barclays, lost over 6 per cent to 791p after house broker ABN Amro cut its 1999 profit forecast to pounds 2.9bn from pounds 2.95. Abbey National was also among the banks' casualties, losing 64p to 1,161p.

Only five Footsie members survived the bloodbath. Telewest excited investors with its growth prospects. The shares put on 2p to 133p. Takeover talk kept EMI afloat. The music group rose a harmonious 4.25p to 365.25p. Railtrack, up 17p to 1,680p; Marks & Spencer, up 3.25p to 415.25p; and National Power, up 2.5p to 518.5p, benefited from their traditional role as safe havens.

IT stocks had Wall Street to blame for their underperformance. The techies had led the US market's overnight slump and London dealers embarked on some copycat selling. Sema was the second largest faller in the Footsie, shedding over 9 per cent to 450p. Colt, the Footsie newcomer, also suffered, losing 48.5p to 743.5p.

Among the IT mid-cappers, CMG fell 117p to 1,385. Micro Focus did not help itself. The fast-growing group lost its chief executive and over 6 per cent to close at 117.5p.

Capita Group drove into a corner and triggered a slide in support services stocks. Rumour has it that it has lost the contract to provide would-be drivers with theory tests. The shares crashed over 8 per cent to 521p. Serco, down 70p to 950p, was hit by reflected gloom as the market fretted about margins in the competitive support market. Sector member AEA Technology was also down 8.1 per cent to 735p.

Hazlewood Foods was also guilty of spreading the selling disease. The convenience food producer disgusted analysts with weak interim numbers and was splattered all over the trading floor with a 7 per cent loss to 132.5p. Associated British Foods caught the bug, ending 57.5p down to 555.5p - Footsie's worst performer. The market fears that ABF's trading update on Friday may be difficult to digest.

Rexam wrapped itself into a mess. The paper group fell 13.5p to 182p as the market cast a gloomy eye on Monday's bid for the Swedish packaging group PLM.

The few risers in the mid cap had something odd about them. Lonrho, the mining giant, dug up a 6.4 per cent rise to 322p, but that was the correction of a bargain-price trade (at 302.5p) late on Monday. Similar story for Rank. The leisure group soared 11.5p to 226.5p, putting right a spaghetti- fingered deal the previous day.

Cortecs, one of the biotech strugglers, lost an unhealthy 56.6 per cent to 11.5p after warning of delays to its star products and the demise of its second senior executive in six months. Engineer Turnpyke, down a third to 5p, said tough export markets would slash profits.

Kenwood Appliances, the kettle and chip-frier maker, issued yet another profit warning and saw the shares burn over 15 per cent to 104p.

SEAQ VOLUME: 1.14 billion


GILTS INDEX: 114.27 +0.33

CITY SITE Estates, a small Scottish property group, firmed 4p to 30.5p, after revealing that it had received a takeover approach. The market is betting that the new offer will top the 26p-a-share from City Site's managing director Louis Goodman. Mr Goodman, launched his pounds 4.4m bid to take the company private in November and now controls around 37 per cent of the shares.

MEMORY CORPORATION, unchanged at 25p yesterday, will be active today. The IT stock, listed on AIM, is expected to announce a pounds 3m contract with ICL. Memory, also traded on the European exchange Easdaq, will upgrade and streamline the memories of all ICL-made tills. The computerised equipment has been installed in supermarkets across Europe and Memory's engineers will tour the continent to replace their chips.