Market Report: Footsie retreats as winning streak stalls

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The Independent Online

The FTSE 100, which managed to stay afloat with a 9.52 point nudge northwards in the session before, finally came off the boil last night, relaxing by 1.3 per cent or 57.29 points to 4,528.84 and snapping a 11-session winning streak.

Bullish traders, who had been rooting for 12 positive sessions on the trot, sought solace in the fact that, despite last night's slide, the index has climbed by more than 11 per cent since the recent winning run began just over two weeks ago. The previous two 11-day streaks – in 1997, and then again over the new year period in 2004 – saw comparatively slender overall gains. A 12th day of gains would have set a new record. The mid-cap FTSE 250 also turned lower, falling to 7,731.16, down almost 2 per cent or 145.7 points.

The rally cooled as investors gave in to the urge to bank profits. A lacklustre start on Wall Street, where leading indices turned lower as trading commenced, abetted the trend during the final hours of play in London.

The heavily weighted mining sector proved the biggest drag on the Footsie, with the Kazakh mining group Kazakhmys losing 6.8 per cent or 57.5p to 789p, and Xstrata, which issued a half-yearly production report yesterday, declining by 6.5 per cent or 51.4p to 735.2p as investors moved to secure recent gains. Others in the sector, including Antofagasta, down 6.5 per cent or 50p at 717.5p, were also held back last night.

The profit-taking trend was also evident around the oil majors, with BP, which said that second-quarter profits, while ahead of analysts' expectations, had slipped well below the levels seen last year, declining to 503p, down 3.1 per cent or 16p, while Royal Dutch Shell eased to 1,580p, down 22p.

Elsewhere, in the banking sector, Royal Bank of Scotland was just over 4 per cent or 1.76p behind at 42p as it emerged that John Kingman, the former Treasury mandarin drafted in to lead UKFI, the body set up to manage the Government's stake in RBS and Lloyds, was planning to step down from his post. Lloyds, which was the subject of some cautious commentary from Morgan Stanley, was also weak, easing to 81.28p, down 2.5 per cent or 2.05p.

"We think a structural (not cyclical) shift in deposit pricing, higher funding costs, and the requirement to term out funding and keep more liquid balance sheets are likely to act as a drag on net interest income over the coming years," the broker said.

Also on the downside, the weak market trend undermined Legal & General, the insurer which retreated to 64.11p, down 3 per cent or 2.01p, despite some words of support from Goldman Sachs, whose analysts reiterated their "conviction buy" stance, saying the stock "continues to trade on the most attractive cash and embedded value multiples in the sector".

The broker's words proved more potent around Amlin, the FTSE 250-listed Lloyd's of London insurer which gained 1.8 per cent or 5.75p to 329.5p after Goldman adopted a "buy" stance on the stock. Further afield, Beazley, which posted interim results in the session before, was also firm, rising by 2.1 per cent or 2.25p to 108p.

There appeared to be little love for Burberry, which was 3.7 per cent or 17p weaker at 443p after the Royal Bank of Scotland began covering the stock with a "hold" recommendation. "While self-help initiatives, working capital control and retail expansion provide valuation support, luxury consumption is likely to remain subdued in the medium term, reflected in relatively modest three-year forward consensus earnings growth forecasts for Burberry," the broker said. "This does not merit a premium rating."

Weir, the engineering group, was left 4.2 per cent or 23p behind at 530.5p after Panmure Gordon weighed in, switching its stance on the stock to "hold" from "buy". "Undoubtedly Weir is a well-run company but, in our view, it no longer represents a value trade," the broker said, pinning the downgrade on "a blend of share price outperformance, valuation reversion, and a rising foreign exchange headwind".

Broker comment also bore on Ladbrokes, which was 2.3 per cent or 4p weaker at 168.5p after Collins Stewart expressed a preference for sector peer William Hill, which nonetheless eased to 181p, down 4.1 per cent or 7.75p. "Ladbrokes continues to trade on a premium to William Hill," the broker said. "Given the anticipated operational outperformance of the latter, combined with much lower levels of debt (and a 10 per cent return on free cash flow by paying it down), we see this as unsustainable."

Among smaller companies, Altitude, the promotional merchandise and market solutions group, resumed trading on AIM, with its shares slumping by more than 31 per cent or 2.5p to 5.5p after the company issued final results, announcing the results of a review of its unaudited preliminary results. "The preliminary results published on 17 March 2009 showed a profit before tax of [£338,000] whereas the final results show a loss before tax of [£33,000]," the company said, adding that the adjustment was "due to a mixture of changes in provisions (including stock), estimates, restating accounting policies and correcting errors".