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Market Report: Japan Airlines woes gives BA the jitters

The Santa rally was finally ho-ho-ho-over yesterday after five straight sessions. The FTSE 100 followed the Asian markets' overnight retreat, with the Nikkei especially driven by fears that Japan Airlines (JAL) was about to collapse. The blue chips ended 39.75 points lower, dipping back below pre-Lehman Brothers collapse levels, to 5397.8 points. The JAL news also had a direct effect on the airline stocks in the UK. As the nerves set in, British Airways suffering for the second day in a row, falling 1.7p to 187.3p.

The mood was muted in general, and few stocks ended in positive territory. Traders said there was little surprise in a trend towards defensive stocks. Cigarette companies were solid, with British American Tobacco the pick, up 4p to 2021.5p.

Once again there was little corporate news to move the market, but an announcement by Petrofac sent the oil services group to the top of the pile. The company, which posted net profits of $265m in 2008, rose almost 2 per cent as it announced that it had made its first move into Turkmenistan. The group won a contract from state-owned Turkmengas to develop a gas field in south Yoloten, about 400km away from the capital, Ashgabat, with the first phase of the contract valued at $100m. The shares rose 19p to 1029p as Petrofac's chief operating officer, Maroun Semaan, said the deal was "a critical part of Turkmenistan's plans to exploit their very significant hydrocarbon resources".

There was further support for British Land, which maintained its solid run from the previous day. The stock was buoyed by the group's announcement that it was to buy rival Segro's 50 per cent stake in a shopping centre joint venture with Tesco. The £26.9m deal, which covers the Surrey Quays shopping centre in London and Clifton Moor in Yorkshire, sent the shares up 2.6p to 464.9p.

It was the heavyweight miners – strong risers the previous day – that dragged the blue chips down on Wednesday, as investors looked to lock in some profit before the end of the year. Traders believed it reflected some uncertainty over price rises this year. Randgold Resources was the highest faller, down 98p to 4977p as the price of gold slipped.

However, Kazakhmys climbed into positive territory after announcing that it had secured a $2.7bn financing package from the China Development Bank and Samruk-Kazyna, a Kazakh fund. Most of the loan will fund a mine in northern Kazakhstan, which should produce 12.5 million tonnes of copper ore every year. Its chief executive, Oleg Novachuk, said: "Securing this funding is a major boost for copper production from Kazakhstan and will help to meet the growing demand of our customers in China." The shares closed up 5p at 1315p.

Another drag on the FTSE 100 came from a retreat at the big oil companies as the price of crude oil remained below $79 a barrel. Shell was the worst, falling 30.5p to 1878p.

As uncertainty returned, the banks were walloped, with the part-nationalised group Royal Bank of Scotland taking the heftiest blow. As confidence evaporated, and amid talk that GMAC Financial Services needed extra aid in the US, the shares lost 3.2 per cent, or 0.96p, to close at 29.08p.

A couple of stocks went ex-dividend yesterday. Alliance Trust, the fund manager run by Katherine Garrett, strengthened 1.7p to 328p, while Experian lost 6p to close at 613p.

On the second line, the insurer Novae Group charged to the top after falls the previous day. The stock has been volatile in December, but closed up 12p at 303p, its highest for the month. Sliding to the bottom of the FTSE 250 was Morgan Sindall, which extended its falls from the previous day. It closed down 24.5p at 590.5p.

In the wider market, Accident Exchange Group, the company that brings beleaguered motorists replacement vehicles, was in buoyant form yesterday, posting an almost 15 per cent rise to 1087p on a strong first-half results announcement. The group, which was formed in 2001 and is based in the West Midlands, posted a 67 per cent jump in pre-tax profits to £4m. There was little drag from news that it could still breach its existing covenants, as it remains in talks with its banker over extending the facilities.

The investment banking and broking group Panmure Gordon rose after it released a positive business update. The company rose 0.5p to 38p after saying it made "significant progress" during the year. It has made hay from clients looking to raise money with secondary issues, gained market share in commission income, and the trading book remained profitable. While it was forced to cut costs and reduce headcount in its US business, "we are seeing early indications of substantially improved activity levels for 2010 and are making a number of targeted hires accordingly".

On Aim, one of the few corporate announcements came from the technology group Redstone, although the news of a widening first-half loss did not budge the shares from 3.12p. The group swung to a £1.2m loss from a £2.6m profit, and the management said a return to profitability would take some time. Its executive chairman, Stephen Yapp, said that "the board is optimistic for the future prospects of the group".