Market Report: Exodus wipes £24bn off blue-chips' value

 

London's stock market always reacts to big global news – but yesterday investors got more than they bargained for. Korean nuclear threats, the re-emergence of bird flu, eurozone fears and yesterday's scary US jobs data caused even the most optimistic punter to make a quick exit. The blue-chip index fell to a two-month low – the biggest one-day fall since 7 November last year.

The FTSE 100 fell back 94.34 points to 6,249.78 following two days of losses. The exodus meant that the UK's top companies were worth £23.95bn less than the day before, according to the FTSE Group.

The investor desertion across Europe, the US and most of Asia's stock markets was in contrast to Japan's Nikkei index, which recorded a four-year high – reaching 13,000 mark before falling back slightly – a level not seen since 2008, as investors reacted to the Bank of Japan's stimulus measures.

Some economic whizzes yesterday predicted that Japan's stimulus could eventually lead to a boost for Europe's equity market. Nomura's Jon Peace said that the Japanese bank buying up long-dated bonds would mean "Japanese real money may be tempted to look abroad for duration requirements to a greater extent than before". But there was no sign of this so far.

To add to the woes in the UK, after the markets closed, the rating agency Standard & Poor warned that Britain's worse-than-expected economic growth could cost the country its top-notch credit rating at the agency.

Airlines, luxury retailers and travel companies were among the worst hit by fears of a new Asian bird flu pandemic. H7N9 has killed six people in Asia and caused investors in Hong Kong to sell shares in airlines last night. So far, the reported cases have been in China, but there are concerns that were it to spread, it would hit air travel worldwide. The panic selling could be overblown, and analysts said it was a good "entry point" to start buying some of the knocked shares.

British Airways' owner, IAG, dived to the bottom of the blue-chip index, plummeting 17.4p to 234.9p, and easyJet – whose trading update (its first since joining the FTSE 100) was a bit mixed – lost 70p to 1,027p.

Tui Travel tripped and lost 14.6p to 298.6p, and on the mid-cap index Thomas Cook was the biggest faller, down 7.9p to 105.8p. The luxury goods group Burberry stumbled 31p to 1,247p, which some put down to its exposure to Chinese shoppers. Nomura yesterday issued a note on the brand ahead of its fourth-quarter sales update on 17 April, and rated it a hold with a 1,350p price target.

Next fell out of fashion with analysts at Credit Suisse, who cut their rating to neutral from outperform, and removed it from its focus list. The clothing and homewares retailer declined 155p to 4,170p.

A surprise riser for a second day was the Kazakh miner Eurasian Natural Resources Corporation. Analysts at UBS and Liberum Capital are now fans of the troubled company after it tumbled to new lows on Wednesday. The shares climbed 7.9p to 243.1p yesterday.

Barclays' research on the impact of the EU financial transaction tax found that the worst-hit of UK listed stocks would be the broker Tullett Prebon, down 14.2p to 251.6p, Icap, 13.8p off at 291.9p, and London Stock Exchange, 33p lower to 1,238p.

An analyst's red pen caused the bookies Ladbrokes to suffer – Deutsche Bank marked it down to hold from buy with a 252p price target, and the shares were 15.5p off the pace at 207.5p.

The small-cap pub group Punch Taverns reported a fall in half-yearly pre-tax profits, but said it will meet its profit targets, and that its ongoing capital restructuring plans are on track too. The shares responded by adding 0.38p to 11p.

The Aim-listed Software Radio Technology said its results for the year will be above market expectations. The group, which creates technology to help ships avoid crashes – a nautical air traffic control – chugged up 2.25p to 22.5p.

Providence Resources and Lansdowne Oil & Gas updated on their Barryroe field in the Celtic Sea. They said 346 million barrels of oil could be recovered. Providence, which dipped 2.5p to 620p, owns 80 per cent of the project, and Lansdowne, which owns 20 per cent, slipped 1.12p to 45p.

Appeals against a decision by Greece's Interministerial Committee for Strategic Investments to include Minoan Group's Crete project in Fast Track has been withdrawn, and the Aim-listed travel and the leisure group Minoan Group's shares travelled up 1.12p to 7.25p.

Buy

BAE Systems

Now's the time to snap up BAE Systems, says Espirito Santo. The arms maker has been in fine form recently, but the broker's analyst Edward Stacey believes there is further to go. He has upped his target price on the stock to 450p (BAE is currently at 386.3p), welcoming recent developments over the US defence budget. He also expects deliveries of Typhoon fighter jets to Saudi Arabia to resume in May.

Sell

Easyjet

Keep hold of easyJet, advises Numis Securities' Wyn Ellis. After the budget airline revealed yesterday it had almost halved its first-half losses in what was its first update as a Footsie stock, the scribbler has changed his advice to "hold", down from "add". The reason is its recent soaring price, with Mr Ellis saying "after a very strong performance the shares may need to take a breather". His target price is 1,075p, with easyJet trading at 1,027p.

Hold

Lonrho

Get rid of shares in Lonrho, is the call from Panmure Gordon. The Africa-focused conglomerate announced a £2.5m placing, and Panmure's analysts have used it as an opportunity to cut their recommendation from "hold" to "sell". The "equity issuance raises concerns over its ability to meet our current forecasts", they say, giving it a price target of 4.8p – the shares are currently 6.31p.

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