Russian ripples felt in gilts

LONDON MARKET: FT-SE 100

UK STOCKS are expected to drop and bonds to gain this week as concern grows that economic turmoil in Asia and Russia will cut corporate profits, especially for banks. "Corporate earnings are continually being revised down and this is going to worsen," said Gareth Evans, an equity strategist at Nikko Europe.

On Friday, the FT-SE 100 Index tumbled 190.4 points, or 3.36 per cent, to 5477.0 - its biggest fall since 5 October 1992. Banks led declines, with Lloyds TSB plunging 41.5 pence, to 735p, and HSBC Holdings dropping 93p to 1,291p.

Still, the index closed the week little changed, supported by a rally that snapped on Thursday. Economic declines in Asia have thrown stock markets into turmoil recently as investors have bailed out of companies that depend on Asia for profit. These include banks such as HSBC and Standard Chartered, which earns 58 per cent of its profit in Asia.

Moscow warned on Friday that Russia's financial crisis will worsen. Its parliament was urged to speed the passage of measures needed to avert a collapse of the financial system. "This crisis has only just begun," said Prime Minister Sergei Kiriyenko.

Investors are concerned that combined with the woes of companies already struggling to boost profits in the face of Asia's recession, there could be further declines.

The broader FT-250 Index fell 2.08 per cent last week to 5074.5, and the FT-SE 350 Index, a combination of the other two, dropped 1.4 per cent to 2631.8. Losses were led by engineers, which make much of their profit abroad, and which fell as the pound strengthened. BTR dropped 10.9 per cent to 147 pence, Smiths Industries 9 per cent to 640p, and BBA Group 7.3 per cent to 388p.

In the gilt market, too, analysts expect Russia to be the focus. "Unless the situation there improves drastically, bonds look set to rally further," said Steve Andrew at Merrill Lynch. The only UK economic reports due this week - international trade figures and a survey of industrial activity - won't alter expectations that interest rates are on hold for the foreseeable future, and so won't affect gilt prices.

On Friday, gilts rose for a second day, driving yields to their lowest in more than 30 years, boosting demand for fixed-income assets. The yield on the benchmark government bond fell 10 basis points, to 5.44 per cent, having earlier touched a low of 5.42 per cent. That made a decline of 16 basis points in the week.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Sport
Gabriel Agbonlahor, Alexis Sanchez, Alan Pardew and Graziano Pelle
footballAfter QPR draw, follow Villa vs Arsenal, Newcastle vs Hull and Swansea vs Southampton
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
New Articles
i100... with this review
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
New Articles
i100
Arts and Entertainment
musicHow female vocalists are now writing their own hits
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

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam