A cautious outlook from an American peer undermined sentiment surrounding the British IT and business services consultancy Logica, which also came under pressure as the market gave way last night. The FTSE 100 slipped below 5,000 points amid worries about the pace of job losses in the world's largest economy.
Logica retreated by 2.3 per cent, or 2.8p, to 121.9p following overnight results from its US rival Accenture, which issued a weaker-than-expected outlook, forecasting earnings per share of $2.64 to $2.72 for 2010, compared with market estimates of $2.75.
In a note to clients, Panmure Gordon said that while Logica's stock might suffer because of the read-across from Accenture, it was confident about the group's prospects and considered its "expectations to low and realistic". Maintaining its "buy" stance on Logica, the broker added: "While investors should anticipate Logica shares pause for breath, we retain our positive stance – dips are good buying opportunities."
Overall, the FTSE 100 touched a session low of 4,954.98 before closing at 4,988.7, down 1.2 per cent or 59.11 points. The mid-cap FTSE 250 index declined to 8,899.96, down 1.8 per cent or 164.32, following a disappointing report on unemployment in the US.
The Labour Department said the American economy lost 263,000 jobs in September, compared with market forecasts of about 180,000, taking the unemployment rate to 9.8 per cent – the highest since June 1983. Figures for July and August were also revised to show that 13,000 more jobs were lost than were originally estimated.
In a grim assessment, Nigel Gault, chief US economist at the forecaster IHS Global Insight, said there was "no silver lining" in the report. "There was nothing to support the view that the economy will be adding jobs before the end of the year, and nothing to support the view that the consumer can sustain the spending increases we saw in August," he added. "Employment and hours worked were down, and housing only inched higher, implying that wage incomes fell."
On the FTSE 100, concerns about the US economy weighed heavily on the mining industry, which was also pressured by traders banking their recent gains. Kazakhmys was among the hardest hit and the sell-off wiped almost 5 per cent, or 50.5p, off its shares, which closed at 986.5p. Vedanta Resources, which had enjoyed a buoyant session on Thursday, came back to earth with a bump, retreating by 3.6 per cent, or 71p, to 1877p.
Xstrata, down 2.1 per cent, or 18.5p, at 853.5p, was in focus as the Takeover Panel set a 20 October deadline by which it must either announce a firm intention to make an offer for Anglo American, or way walk away for six months. "We believe Xstrata is not in a position to launch an offer for Anglo American and that it has other issues to resolve which will absorb a considerable amount of its time," said Charles Kernot, an analyst at Evolution Securities.
He was referring to concerns about Lonmin, the platinum miner in which Xstrata maintains a stake, and Incwala, a company that Lonmin helped to set up five years ago under the aegis of South Africa's black empowerment programme.
"There is an increasing expectation that Lonmin will have to raise external capital rather than refinance Incwala's debt," Mr Kernot explained. "If Xstrata wants to retain its Lonmin stake at 25 per cent, there is a risk that it too would have to raise external capital."
At the close, Lonmin was 2.2 per cent, or 33p, weaker at 1505p, while Anglo American lost 9.5p to 1876.5p
On the upside, the inter-dealer broker ICAP saw its shares firm up by 2.8p to 420p after Citigroup reiterated its "buy" stance, albeit with a revised target price of 490p compared with 500p previously. Analysts at Singer Capital Markets also weighed in, moving the stock to "buy".
"With revenue expectations raised and more clearly achievable, and regulation favouring ICAP's post-trade services business expansion and its broking platforms, we believe an improved rating is justified," Singer said, setting a 470p target price.
Elsewhere, the paper and packaging group Mondi rose by 1.3 per cent, or 3.9p, to 308.1p thanks to Credit Suisse, which upped the stock from "neutral" to "outperform" in a sector review. Rexam, which was also rated "outperform", was unsettled, easing back by 0.6p to 262.6p. Further afield, traders dealing in the housing sector had to contend with mixed signals. On the one hand, the latest data from Nationwide Building Society revealed that Britain's house prices rose for a fifth month in a row in September. But the report also indicated that the rate of in the property market was still weak.
Elsewhere, KBC Peel Hunt advised investors to sell out of the sector, saying it appeared to have "run out of positive momentum". As a result, Barratt Developments, which was highlighted by KBC as the most overvalued housebuilder, fell almost 5 per cent, or 12p, to 232.2p, while Bellway fell 2.3 per cent, or 18.5p, to 790.5p.
Redrow proved more resilient, easing back by less than 1 per cent, or 1.5p, to 211.5p. Bovis Homes fell by 12.6p, or 2.7 per cent, to 450p.