Market Report: Shares crash as rate hopes are dashed
Friday 09 October 1998
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.
Diving in at the deep end is no excuse for shirking the style stakes
- 2 Loom bands: Bids for dress made from colourful rubber pass £170,000 on eBay
- 3 Why I'm on the brink of burning my Israeli passport
- 4 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
- 5 The true Gaza back-story that the Israelis aren’t telling this week
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Loom bands: Bids for dress made from colourful rubber pass £170,000 on eBay
Supermoon 2014: When and why will the moon look bigger and brighter this summer?
Tommy Ramone dies: Last surviving founder and drummer seminal punk band The Ramones dies aged 62
Gaza-Israel conflict: The terrible price Palestinian children are paying for Israel’s war with Hamas
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...