Fears for the financial health of emerging markets bore on the international banking group Standard Chartered, which sunk to an intra-day low of 821.5p yesterday, a fall of more than 13 per cent. Investors were apparently spooked by the increased money market and currency volatility in South Korea and Pakistan and by a recent report from NCB Stockbrokers, which said slower growth in emerging economies was likely to put the brakes on the rapid growth seen by the group over the last few years.
"Recent economic data from emerging Asia has confirmed our fears that the near-term risks from the knock-on effect of the credit crisis have escalated," NCB added in a note as it moved the stock to "hold" from "buy". It also cut its 2009 earnings estimate for Standard Chartered by 11 per cent to $2.36 and reduced its target price for the stock to 1100p from 2000p. The bank's shares closed 4.86 per cent, or 46p, down at 900p, thanks to some early strength on Wall Street, which prompted a late shift in sentiment in London.
Buoyancy in New York also helped the FTSE 100 index, which pared its losses in the last hours of trading to close up 46.94 points at 4,087.83. The FTSE 250 was less fortunate and closed own 103.97 points at 6,128.65. David Jones, a market strategist at IG Index, said that while recent sessions had seen further big falls for global stock indices, yesterday's movements offered some solace, adding: "As long as dips below 4,000 on the FTSE 100 continue to bring buyers back out, it looks like investors can be spared the stomach-churning, near-vertical drops we saw at the beginning of October."
On the FTSE 100, metals prices fell and Goldman Sachs, returning from a trip to China, lowered its base metal and coal forecasts, sparking fresh concern for the mining sector. "Our trip to China emphasised the effect that the global financial crisis is having not only in export markets but also on local consumption and government policies that have supported metal demand growth and prices," it said in a note.
The comments reinforced fears for the sector sparked by BHP Billiton's warning about softening demand from China. BHP, whose proposed merger with rival Rio Tinto was conditionally backed by South Africa's Competition Commission, closed down 57p at 823p, while Rio was down 149p at 2240p. Xstrata, which has been hit by concerns about the short debt exposure of its shareholder Glencore, lost 83p to close at 840p. Kazakhmys was down 18.75p at 239p and Antofagasta ended the day on 274p, a fall of 14.5p.
On the upside, the Wall Street rally led to gains for insurers, including Aviva, which gained 9p to close at 275p. Analysts at Panmure Gordon weighed in on Aviva yesterday, arguing that the recent weakness in its stock had created "an excellent buying opportunity" and discounted the possibility of a capital-raising in the short-term.
Meanwhile, the consumer goods conglomerate Unilever gained 50p to reach 1,407p after a positive update from its rival Nestlé, which posted a forecast-beating rise in sales.
Oil prices rose before today's meeting of the Organisation of Petroleum Exporting Countries. This helped BP climb by 22.25p to 465p. On the FTSE 250, Taylor Wimpey fell by 15.69 per cent, or 2p, to 10.75p after Merrill Lynch cut its target price for the stock to 9p from 42p. Analysts said the fact that the housebuilder's debt talks continue to drag on suggested "a successful, conventional refinancing is by no means a foregone conclusion". The broker added: "The longer talks continue, the more likely it is that equity shareholders will see the value of their shares slip further."
Taylor's rival Barratt Developments, whose target was cut by Merrill from 59p to 41p, plunged by 11.33 per cent, or 7.25p, to close at 56.75p.
Shares in several mid-cap retailers fell after DSG International tendered fresh evidence of tougher trading conditions. Debenhams was down 12.31 per cent at 28.5p, Kesa Electricals, fell 6p to 70.25p and Carphone Warehouse was down 3.75p at 131p. DSG's stock, however, gained 8.51 per cent to hit 25.25p after it told investors it was not about to break any banking covenants.
Among smaller companies, shares in the marine electronics manufacturer Raymarine plummeted by 72 per cent, or 45.5p, to 17.75p after it warned its profit would miss analysts' estimates because fewer boats were being built and its sales had fallen by 8.5 per cent in the nine months to 30 September. Panmure Gordon moved Raymarine's stock from "hold" to "sell" and cut its 2009 earnings estimate by 48 per cent to 8.9p. It noted: "The evaporation of business during October leads us to adopt much harsher assumptions for 2009. Even with a heavy dose of cost-cutting, [Raymarine's] debt covenant looks as if it will be breached."Reuse content