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Market Report: Broker downgrade decimates Trinity

Bad broker comment bore on Trinity Mirror, the newspaper publisher, which closed down almost 10 per cent, or 11.25p, at 102.25p last night.

Deutsche Bank, which published a bearish media sector review yesterday, sparked the sell-off, downgrading the stock to "sell" from "hold" with a reduced 45p target price.

"We believe that fallout from the global credit turmoil will have a greater impact on earnings, undermining global growth and consumer spending," the broker said. "So we have downgraded again ... our 'sells' are concentrated on those stocks which still have the highest [earnings] and/or structural risk combined with inappropriate valuations."

Beside Trinity, the broker advised investors to "sell" Johnston Press, which was down 9.55 per cent, or 3.75p, at 35.5p, and Daily Mail & General Trust, which slipped to 350p, down 8.79 per cent or 33.75p.

Overall, the FTSE 100 was down 100.14 points at 5,136.12 while the FTSE 250 lost 298.43 points to 8,454.58.

The Financial Services Authority's ban on short selling failed to protect the banking sector, which traded lower amid worries about the United States government's $700bn plan to purchase toxic mortgage backed assets.

Traders said that investors were selling on concerns that the measures may be held up by a protracted debate between the executive and the legislature in Washington.

"If this [the American bailout plan] is delayed, then quite frankly the feeling that we have reached bottom looks wrong," said one market source, adding: "We may see equities turn lower than they did last week." One theory doing the rounds suggested that the sell-off exemplified a flaw in the FSA's short-selling rules – it was said that the ban removed the possibility of covering, i.e., the buying of shares, thereby leaving financial securities exposed to selling.

This was met with scepticism among a number of traders, who said that there were genuine concerns underpinning the selling. One said: "It does not look so unusual and technical to us – at least not today. We will probably learn more about how this playing after data from a few more sessions."

Beside concerns about the American plan, the sector was under pressure from a new British Bankers' Association report, which said that mortgage approvals had touched a fresh a low in August. As a result, HBOS, which is the subject of an all-share offer from Lloyds TSB, was down 13.78, or 28.8p, at 180.2p. Lloyds was down 4.82 per cent, or 13.25p, at 261.75p and Barclays lost 4.22 per cent, or 15.75p, to 357.25p. HSBC, which is seen as one of the most defensive banks in the UK, was the lone riser in the sector, up 8p at 874.5p.

London Scottish Bank, which was the subject of the first short-selling disclosure under the new FSA rules, was down 7.97 per cent, or 0.47p, at 5.43p after Timothy Babich's Fortelus Capital said that, as of last Friday, it had a short position in 5.33 per cent of the company's stock.

Elsewhere, British Energy was down 4.5p, at 724p, despite talk that the EDF board was due to decide on a 774p-per-share offer at a meeting last night.

"It's had little effect on the stock because I think the market is just tired of these rumours. There have been so many," said one trader, explaining the weakness in the stock.

The heavyweight resource stocks fell back after commodity prices eased and Anglo American was down 8.21 per cent or 191p at 2,136p. Xstrata lost 187p to 2,235p while its bid target, Lonmin, was down 53p, at 2,540p.

Vedanta Resources was down more than 10 per cent or 177p, at 1,527p, after reports in the Indian press indicated that The Children's Investment Fund, the London-based hedge fund, was planning legal action against the miner on the grounds that its recent restructuring proposals were skewed against minority shareholders.

A disappointing trading statement from Mitchells & Butlers, down 6.24 per cent or 17p at 255.5p, struck pub companies and Punch Taverns was down 13.04 per cent or 27.75p at 185p while Enterprise Inns, which is due to update the market next week, slipped back to 186p, down 7.23 per cent or 14.5p.

The BBA's report on mortgage lending sullied sentiment in the housing sector and Barratt Developments was down 7.56 per cent or 10.75p at 131.5p. Bellway slipped to 630p, down 7.35 per cent or 50p, and Taylor Wimpey lost 2.25 per cent or 2.5p to 45.5p.

On the upside, positive comment from Goldman Sachs took business outsourcing specialist Xchanging 254.25p, up 5.25p.

"Outside sections of Xchanging's procurement and HR [human resources] business, cyclicality is limited; we expect these operations to prove relatively stable in difficult economic times," the broker said, initiating coverage on the stock with a "neutral" rating.