Market Report: RBS horror show mires FTSE 100 in the red

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The Independent Online

Things may have looked good on Monday, the first session after Halloween, but the real horror show played out yesterday. Michael Myers, the fictional serial killer from the Halloween films, would have been proud of the bloodletting, as the top tier was awash with stocks plunging into the red.

The FTSE 100 fell over two per cent in the morning, crashing through the psychological 5,000 barrier as the banks and the miners flopped. Sentiment was not helped by the UK's construction PMI index falling to 46.2 in October. It crawled back over the line in the sand to close at 5,037.21 points.

There was "no tittle-tattle", according to one observer, with banks dominating the day after the Chancellor, Alistair Darling, unveiled the dramatic reshaping of the industry. Worst was Royal Bank of Scotland, tumbling almost 10 per cent as details of its asset fire sale emerged with the Government's stake rising to 84 per cent. The sell-off was worse than expected, and further bad news for investors came as the group said it would not pay dividends or exercise any call rights for two years. It closed seven per cent down at 35.93p.

Fellow taxpayer-supported Lloyds Banking Group enjoyed a reversal of fortunes despite early losses. The £13.5bn rights issue had been so well flagged that it ended the day as the strongest blue chip, up 2.74 per cent at 87.5p. The only speculation centred on Barclays possibly flogging off its retail arm, after the division's boss, Fritz Seegers, left following a reshuffle. It closed 1.98 per cent lower at 323.4p.

The miners shuddered into reverse after lifting the blue chips the previous day, along with better than expected US economic data. As metal prices fell on demand fears, speculative news that BHP Billiton was set to charge back in for Rio Tinto dissipated. Lonmin was the worst after the sector strengthened in the afternoon, down 2.74 per cent at 1,493p.

The first day of trading for Delta Lloyd proved a damp squib as its initial public offering fell in Amsterdam in line with the insures. The listing of the Dutch unit was announced by Aviva last month, but investors weren't happy at the discounted pricing. Aviva fell 2.52 per cent, to 379.3p, as it sold 63.5 million shares in Delta near the bottom of the range.

Legal & General, however, ended in the black, up 0.9p to 78.5p despite a seven per cent drop in global sales, to £1.05bn, during the first nine months. The results beat analyst expectations and management said new business enquiries were very healthy. Investors were also pleased as the chief executive said it would not be selling its investment management business.

Rolls-Royce, which makes engines and not the luxury car as its new public relations man found out this week, took a hit as the group released an interim trading statement. Nick Cunningham, of Evolution Securities, reiterated his "sell" stance following the downbeat statement. "The stock looks expansive and has outperformed peers such as EADS and Boeing, so it is likely to come off slightly." It shed 1.9 per cent, to 443.1p.

Few investors were dancing for delight even though it was Hammer Time yesterday. Concerns over property debt levels at real estate investment trust Hammerson saw the shares drop 1.7 per cent, to 390.5, after it raised concerns over the level of property debt that needs refinancing.

The management merry-go-round sent waves through the second tier. Paper and packaging group DS Smith carried out a bit of rustling as it poached the chief executive of McBride. The aggrieved group, which makes own-brand household products in Europe for Tesco, among others, announced yesterday that DS Smith had wrapped up the signing of boss Miles Roberts, sending the shares down 5.36 per cent to 208.3. DS Smith's shares went the other way, soaring 7.2 per cent on the news, with Roberts due to replace Tony Thorne early in the new year.

It replaced Dunelm Group, which stormed to the top of the FTSE 250 after a strong interim management statement. Investors hit the shops after the group said full-year profits would be ahead of expectations. Dunelm has done particularly well from its discounting drives and from the collapse of rivals Woolworths, MFI and Rosbys. The group has grown from a market stall 30 years ago and hopes to reach 150 stores. Shares closed up 6.38 per cent at 346.8p.

Yell Group screamed all the way to the bottom of the second string, the day after it finally secured agreement to restructure its debts. Part of that drive includes raising £500m in the equity markets, and investors weren't feeling overly happy about its prospects yesterday as it lost 15.64 per cent to close at 57.85p.

There was good news for Blacks as it finalised plans to restructure its debts. If it all goes through the group will be saved. The shares rose before the wider market dragged, leaving it five per cent down at 28p.

Network monitoring group Endace lost five per cent, to 261p, as it swung to a loss, while Amino Technology's shares hit an all-time low, after the internet TV company warned it would be significantly below expectations. It lost almost a third to close on 29.5p.