Market Report: Man 'flying on one engine' and losing height

The London-based hedge fund group Man closed at its lowest level since 2003 last night after Citigroup, concerned about the company's growing dependence on its flagship AHL fund, switched its stance on the stock to "hold".

Citigroup also slashed its target price for Man, to 265p from 570p, arguing that, with AHL, the group was "flying on one engine", which implied increased earnings volatility.

"Not only that, but this engine is already operating at optimum pace, generating +11.5 per cent returns in October," the broker said.

"We see the outlook for fund flows and AUM [assets under management] growth in the near term as largely dependent on positive performance by AHL. Performance is notoriously volatile, putting the group in a vulnerable position, in our view."

Citi's circular followed a similar assessment from Morgan Stanley, which reduced its target price for the stock to 260p from 455p the day before and helped to depress Man to 190p, down 23.39 per cent, or 58p. At the close, Man was the weakest stock on the combined FTSE 350 index.

Overall, the spectre of a sharp, serious recession came back to haunt the London market, pushing the FTSE 100 down 64.67 points to 4,182.02 and the FTSE 250 to 6,251.18, down 153.33 points. Investors fled after the Bank of England published its November inflation report, highlighting the risk of yet tougher economic conditions, while the Office for National Statistics revealed that unemployment had climbed to an 11-year high with more than 1.8 million people out of work. Traders said that, given the mounting economic gloom, the market might test October's lows in the coming sessions. On the FTSE 100, falling metals prices and production cuts at Eurasian Natural Resources Corporation, down 6.89 per cent or 19.5p at 263.5p, bore on the mining sector. Kazakhmys was the hardest hit, losing 10 per cent, or 30.5p, to 274p, while Vedanta Resources fell to 623p, down 8.78 per cent or 60p. Anglo American retreated to 1,279p, down 8.38 per cent or 117p, and Xstrata was down 7.06 per cent, or 76p, at 1,000p.

Oil prices continued to slide as the dollar strengthened and commodities traders feared that supply would outstrip demand as the global economic crisis gathers pace, depressing Cairn Energy, which fell to 1,504p, down 6.35 per cent, or 102p, and BG, which was down 5.42 per cent, or 49p, at 855p.

In the banking sector, Dresdner Kleinwort said that it expects Standard Chartered, down 7.5 per cent or 64.5p at 795.5p, to move to boost its capital base by between £2bn and £3bn in the coming weeks.

Barclays fell to 168.2p, down more than 6 per cent or 10.8p, amid signs of growing shareholder opposition to its planned fundraising exercise.

On the upside, British American Tobacco gained 21p to 1,681p after Goldman Sachs moved the stock to "buy", arguing that, in a slowing consumer environment, the tobacco group's emerging market exposure, strong balance sheet and attractive dividend yield made for a good investment opportunity.

Among mid-caps, Punch Taverns traded lower, down 10.71 per cent, or 16.25p, at 135.5p, after the ratings agency Moody's placed a number of classes of notes issues by Spirit, one of the pub group's three securitisation vehicles, on review for a possible downgrade. The wider sector was also weak amid concern about the impact of the recession and recent calls for the ban on so-called "happy hours", when pubs offer discounted drinks to lure customers.

Enterprise Inns was the weakest, down 23.18 per cent, or 25.5p, at 84.5p, while Mitchells & Butlers lost 5.98 per cent, or 10.25p, to 161.25p and JD Wetherspoon fell to 272p, down 2.68 per cent, or 7.5p. Parts of the housing sector, including Taylor Wimpey, down 7.35 per cent, or 0.79p, at 9.96p, and Persimmon, down 7.8 per cent or 21.5p at 254p, also fell back after recessionary fears overshadowed predictions of another large interest rate cut next month.

Elsewhere, UBS upgraded Meggitt to "buy", arguing that long- and medium-term investors should capitalise on recent weakness. "Given that we expect 2010 to mark the trough in Meggitt's earnings cycle, we believe [current multiples] are undemanding and offer the long-term investors a good buying opportunity," the broker said, aiding the stock to 150p, up 9.69 per cent, or 13.25p.

Among smaller companies, property group Minerva was on the back foot, down 18.89 per cent, or 2.22p, at 9.53p, after Merrill Lynch switched its stance on the stock to "underperform".

"Given the uncertainty surrounding its development pipeline, no dividend yield and negative recurring income we prefer to err on the side of caution," the broker said, slashing its target price for the stock to 9p from 40p.

Start your day with The Independent, sign up for daily news emails
footballHe started just four months ago
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Arts and Entertainment
(L-R) Amanda Peet as Tina Morris, Melanie Lynskey as Michelle Pierson, Abby Ryder Fortson as Sophie Pierson, Mark Duplass as Brett Pierson and Steve Zissis as Alex Pappas in Togetherness
TV First US networks like HBO shook up drama - now it's comedy's turn
Pool with a view: the mMarina Bay Sands in Singapore
travel From Haiti and Alaska to Namibia and Iceland
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect