Market Report: Shares catch a chill from sick US mortgage duo

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The Independent Online

The health – or lack of it – of the American banking system provided an ominous backdrop to trading in London, as worries grew that there could be more bad news from the troubled US financial sector.

With the mortgage fin-ance giants Fannie Mae and Freddie Mac both in the sick ward and possibly needing a government bail-out, it was hardly helpful for former IMF chief economist Kenneth Rogoff to warn of a "whopper"-sized US bank collapse in the next few months.

So it was only a question of how far the FTSE 100 would sink before Wall Street opened to add to the misery. With all the big UK banks under the cosh, the FTSE 100 limped to the end of a miserable session 129.8 points lower at 5,320.4. The FTSE 250 dropped 256.4 to 8,867.6. Wall Street was 120 points in the red as London ended.

HBOS was the worst hit among bankers, down 22p at 277.5p and one rung off the bottom of the FTSE 100. Keeping it company was Royal Bank of Scotland, 13.5p lower at 215p, and Barclays, 18.5p easier at 324.2p. Plumbing and building suppliers giant Wolseley, with huge exposure to the crippled US housing market, had nowhere to hide and ended down 36p at 389.5p, nearly 60 per cent below its level a year ago.

The replacement hips and knees group Smith & Nephew jogged 13.5p higher to 632p on talk that its American rival Zimmer is limbering up for a full bid. S&N is worth £5.4bn. This is not the first time the orthopaedics pair have been linked and once again the reasoning is sound. S&N has just turned in solid results for the second quarter, while the strength of the dollar would make it more attractive for an American buyer. S&N has risen 8 per cent in the last month.

Signet, the world's big-gest jewellery chain, which trades as H Samuel and Ernest Jones in the UK, is packing its bags and moving to the United States, where it operates as Kay Jewelers. The primary listing for the shares will move from London to New York next month, with its tax base moving to Bermuda. The market greeted news that shareholders had approved the switch by marking the shares down 3p at 59p. However, broker Investec says the shares will benefit from the move because the US rates retailers like Signet higher than in the UK.

Broker JP Morgan thinks the outlook for BSkyB could be difficult as advertising revenues come under increasing pressure. As well as reducing its estimate of earnings per share by 10 per cent for the next two years, it has also cut its target price for the shares by 80p to 480p, sending them 23.25p lower to 439.5p. With more advertising migrating from print to the internet, shares of publishers Trinity fell 10p to 100p and Johnston Press 5.5p to 54p.

Wellstream, the oil services group, gained 70p at 1,110p after winning a contract worth £600m over four years to supply offshore piping and other equipment for oil giant Petroleo Brasileiro. However, one broker thought the contract should have been worth more but still expects the shares to reach 1,425p.

Aggreko, one of the world leaders in the supply of temporary power and temperature control systems, extended its grip on the oil and gas market with the acquisition of Canadian outfit Power Plus Rentals for £19.5m. Broker Dresdner Kleinwort welcomed the deal, which looks good value, and forecast a price for Aggreko of 690p compared with a market price of 660p, down 7.5p on the session.

Enfis held firm at 85p despite increased first-half losses but remains on course to develop a range of energy-efficient lighting systems which should see it break into profit next year, according to broker Edison. The firm, which floated on AIM in March last year, plans to build up a global distribution network. Edison is forecasting sales rising from £1.5m this year to £6m in 2009.

Investors were quick off the mark to pocket profits at the outsourcing group Mears, where the shares have raced ahead 23 per cent in the last month in anticipation of good results. Mears did not disappoint, with half-time profits up 25 per cent to £8.7m and £430m of new orders. The shares retreated 22.5p to 297p but broker Arbuthnot is tipping them to hit 400p.

Creightons, the micro-sized toiletries and fragrances group, lost 25 per cent of its value after warning that its financial position had deteriorated since March. Costs are rising and suppliers are hitting it with increased prices. The shares closed at 1.5p.

Minmet, the tiny AIM-listed oil and gas exploration company, jumped 1.5p to 5.25p after a bid approach. It seems most likely the approach is from Mitre Oil and Gas, which owns nearly 20 per cent having picked up former shareholder Kevin Anderson's stake in July.