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



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
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'