Market Report: Shares crash as rate hopes are dashed

A BASE rate cut regarded as too little, too late and growing fears of more hedge fund disasters combined to rout the stock market. At one time Footsie was down 229.7 points to 4,599.2. By the close the retreat was cut back to 130 at 4,698.9.

It was a savage, indiscriminate crash which few shares avoided. With hopes of a 0.5 percentage point interest rate reduction dashed, the market was quick to register its disappointment.

Shares had already fallen before the Monetary Policy Committee statement, upset by the Federal Reserve chief Alan Greenspan's warning on the US economy and Tokyo's overnight plunge. They went in freefall once the rate cut was announced, before clawing back some of the slide in the afternoon despite a predictable poor New York display.

Worries about high-profile hedge funds caused acute anxiety. An array of stories swirled around, suggesting desperate and largely unsuccessful attempts to unravel tortuous positions involving the Japanese yen.

Many hedge funds are big shareholders in British companies. Worries that they are dumping their holdings - or soon will - to ease their financial plight are one of the unnerving influences nagging the market.

The fears weigh heavily on banks. Barclays, which has admitted an exposure to the stricken Long-Term Capital Management hedge fund, was in familiar mode, giving up 55p to 940p, and Royal Bank of Scotland fell 22.5p to 61p. Lloyds TSB eased 22p to 602p.

The mortgage banks, which like their clearer rivals quickly lowered interest rates, fared much better, reflecting their lack of international involvement.

Standard Chartered, astonishingly, resisted the retreat, gaining 29p to 470p. Ignoring the gloom, a splendid old story was resurrected --Lloyds to mount another takeover bid. Since its earlier assault, 12 years ago, was defeated, the market has periodically been gripped by rumours of a new Lloyds attack. Standard's shares have crashed from 1,081p as first the Asian crisis and then the banking meltdown hit them.

Insurers suffered, with Prudential Corporation leading the retreat. Fears about its liability to guaranteed pensions were one influence; another was lower net asset value estimates.

Supporting shares were hammered. The mid cap index plunged 109 points to 4,251.2, lowest since the summer of 1996. The small cap index lost 27.5 to 1,838.5, back at levels seen in 1995. Government stocks fell with equities, ending 1.3 down.

Despite the turmoil, analysts continued to trot out their recommendations and many are still happy to trot out "buy" suggestions.

Credit Lyonnais was attracted by the defensive merits of the generators, putting a 950p target on PowerGen (unchanged at 852p) and 650p on National Power (8.5p higher at 575p).

Safeway, the supermarket chain, gained 11.5p to 294.5p as Goldman Sachs, although cutting profit estimates, said buy.

But CSFB said sell Railtrack, putting forward a 1,300p price against a close of 1,415p, down 33p.

Hotels were ruffled by HSBC caution, with Ladbroke a shade easier at 205p and Millennium & Copthorne off 17p at 296.5p. Granada firmed to 684.5p.

Imperial Chemical Industries attracted a supporter - BT Alex.Brown. The investment house said buy but reduced its profit forecasts to pounds 370m for this year and next. The shares fell 2p to 520p.

Johnson Matthey, the engineering and metals group, retreated 9.5p to 294.5p although Robert Fleming Securities believes the shares are now offering their best value for more than a decade. Analyst Nick Hyslop points out that the shares outperformed the market by 100 per cent in the last recession.

Merrill Lynch also alighted on engineers, backing Cobham, up 16.5p at 724p. Lehman Brothers was cautious on TI, off 8.25p at 344.75p.

Takeover speculation and the pounds 29m sale of its Danish operations lifted Booker, the cash and carry chain, 3.5p (after 10p) to 138.5p but Blacks Leisure softened 20p to 186.5p as SG Securities removed its buy signal.

The breakdown of takeover talks at Abacus Recruitment cut the price 22.5p to 142.5p but Sherwood, the clothing group, stretched to a 6p gain at 42.5p as management announced a 48p a share bid, which non-executive directors describe as too low.

Wiggins, the property group, duly confirmed its airport expansion; it has signed heads of agreements to buy three regional European airports and one in North America. The shares shaded to 10.5p.

Profit warnings continue to appear. Robert H Lowe, the packaging and sportswear group, nearly halved to 3.25p and Weeks, a civil engineering consultancy, slipped 0.5p to 3p.

SEAQ VOLUME: 1.1 billion

SEAQ TRADES: 67,111

GILT INDEX: n/a

THE COST of replacing pint marked beer glasses unsettled the pub chain JD Wetherspoon. The shares fell 13p to 147.5, their lowest for more than two years, on worries that it faces a pounds 250,000 bill to roll out new glasses. The once high-flying group is noted for scoring an own goal during the World Cup with its ban on television sets. The shares were 341.5p early this year.

WITH SHARES crashing, it was not the day for smiles but a company of that name braved the carnage to roll out its plans to come to market. Smiles, a Bristol brewer, wants to raise pounds 3.75m at 75p a share. It has five pubs and is in the process of buying a further eight. The company, which is seeking a presence on the fringe Ofex market, hopes to increase its estate to 20 pubs.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor