Market Report: FTSE 100 massacred as eurozone fears intensify

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The Independent Online

On a day where company news took a back seat, Europe was the focus; and a bloodbath ensued. The FTSE 100 fell after three days of rises, and boy, what a fall.

The top tier gave up a whopping 3 per cent, or 170.8 points, to close at 5,262.8. While there had been a slight wobble in London over potential disagreements in the coalition government, the fracturing of the eurozone really caught the imagination. Fears escalated on reports that the French President, Nicolas Sarkozy, had threatened to pull the country out of the euro if Germany failed to help Greece. Deutsche Bank's chief executive, Josef Ackermann, did not help as he predicted that the Greeks would never pay the debts back in full.

At the close, one measly stock had made it into positive territory. Wolseley, the building materials supplier, released a strong trading update predicting that full-year profits would beat expectations. The shares leapt 8 per cent in early trading, but eased as the market spiralled, closing 4.9 per cent higher, or 80p, at 1688p. In reaction Collins Stewart raised its "sell" rating to a "hold". Seymour Pierce also raised its estimates on full-year earnings.

The Mexican silver and gold miner Fresnillo had limped into the black in the morning, bucking the wider trend in the sector. Traders believed the rises followed nervy investors' flight to safety, sending gold to record highs earlier in the day. Yet it failed to hold the rise, finishing the day down 7p at 887p.

Elsewhere prices were plunging among the miners, which proved a significant drag on the blue chips. The price of copper, aluminium and zinc retreated over concerns for the state of the wider global economy, especially the fears of the eurozone. Moody's comments that it was more than likely to downgrade Greece's debt rating once again did not help. Plummeting to the bottom of the shaft was Xstrata, which lost 87p to 1,009p. It was followed down closely by ENRC, which closed 80p lower at 1,057p.

The rumblings of fear knocked the banks off course. Barclays was the most affected, losing 20p to 308.9p as the sector suffered from fears over sovereign debt, several analyst reports, and a ruling from the UK competition watchdog. The sector was hit after Credit Suisse analysts said higher capital requirements and lost earnings could cost the industry €244bn. The Competition Commission also announced yesterday that it was standing by its ruling to ban payment protection insurance at the same time a loan is taken out. The day was topped off by Seymour Pierce which published a note looking at a break-up of the banks entitled "Paradise Lost".

On the second tier, Renishaw investors were purring as the group predicted that full-year profits would be significantly ahead of expectations. The company that makes equipment used in engineering, dentistry and neurosurgery was up almost 10 per cent at one stage. The shares closed up 14.5p at 697p.

Near the bottom of the FTSE 250 was the publishing group Trinity Mirror. The shares fell to an almost nine-month low as losses extended from the previous day's trading update. It had given up as much as 10 per cent on Thursday and fell similar levels during yesterday's session over fears for potential advertising revenues. It ended the day down 9.2p at 112.3p.

Falling 8.9p to 127.9p was Enterprise Inns. The hangover had truly set in after the company successfully refinanced its £625m debts earlier in the week. Yesterday Moody's confirmed the pub company's B1 rating with a negative outlook.

Also down was the fund management company Gartmore Group, which came to market late last year. The group suffered a staggering £1bn in client withdrawals, it admitted in a trading update yesterday, after star manager Guillaume Rambourg was suspended following an internal investigation. Despite attempting to calm investors with talk that outflows had slowed since the beginning of May, the shares gave up 7p to close at 144.2p.

Kewill, a UK logistics company, was in focus yesterday after revealing that it had become a takeover target. The shares were much in demand, leaping 23 per cent as it announced the approach from an unnamed suitor. Rumours in the market suggested that the bidder may well be an American giant in the form of SAP or Oracle. Either way, Kewill's shares closed 23p up at 123p.

The water broke over the side of Raymarine yesterday. The group, which makes electronics systems used on boats, saw its shares holed beneath the waterline as it revealed yesterday that a suitor – whose identity it would not reveal – had pulled out of buying its operating subsidiary. The move left the company facing Davy Jones' Locker, or administration at any rate. The company had already breached its covenants and was in urgent discussions with its banks. The shares were suspended late in the session, and the banks said they were to put it into administration. Several hours later it emerged that Flir Systems had agreed to buy it in a deal worth $180m.

Computacenter was unable to post share gains by the close of the session despite a positive first-quarter update. The IT services provider boosted revenues 8 per cent to £616m, but the shares closed 2p down at 331.8p.

FTSE 100 Risers

Rolls-Royce: 604.5p (down 7p, 1.14 per cent) UK engine maker outperforms FTSE 100 following positive news from America.

Capita Group: 809.5p (down 1.5p, 0.18 per cent) Outsourcer only just slips into negative territory as it rebounds from Morgan Stanley downgrade.

J Sainsbury: 331.9p (down 6.6p, 1.95 per cent) Another stock to do better than the market, after it topped profit forecasts on Thursday.

FTSE 100 Fallers

Vedanta Resources: 2389p (down 169p, 6.6 per cent) Mining sector hit as commodity prices slide in the face of wider financial fears.

Lloyds Banking Group: 57.68p (down 2.87p, 4.74 per cent) Banking sector smashed on tensions in eurozone and analyst reports.

Thomas Cook Group: 225.1p (down 11p, 4.66 per cent) Travel agency company gives up previous day's gains on half-year report.

FTSE 250 Risers

Premier Foods: 24.96p (up 0.44p, 1.8 per cent) Group claws its way into positive territory as investors still backing its bounce off lows earlier in the month.

Robert Wiseman: 483.3p (up 7.5p, 1.58 per cent) Investors extend dairy company's gains into a second day.

Cranswick: 819p (up 2.5p, 0.31 per cent) Sausage maker shrugs off previous day's losses and rebounds to two-month highs.

FTSE 250 Fallers

Inchcape: 32.12p (down 2.6p, 7.7 per cent) Car dealership plummets after a week of rises helped up by solid first-quarter numbers on Thursday.

Cookson Group: 519.5p (down 40p, 7.15 per cent) Investors in the industrial materials firm decide to bank profits.

Partygaming: 289p (down 10p, 3.34 per cent) Morgan Stanley cuts the price target on UK gambling firm from 400p to 390p.

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