Bearish sentiment besieged the housing sector yesterday after investors, increasingly concerned by signs of a sharp economic slowdown, feared that no US-style reprieve would be forthcoming from a hawkish Bank of England.
The Bank's Inflation Report, while indicating some reduction in the UK's base interest rate, dampened hopes of a series of aggressive cuts. Along with an earlier report from the Royal Institution of Chartered Surveyors, which revealed that the domestic housing market was settled on a downward trend, it sparked yet another sell-off among housebuilders.
Taylor Wimpey was worst hit, losing 2.7 per cent to 173.1p. Persimmon was just behind, losing 2.62 per cent to 726p, while Barratt Developments lost 1 per cent to 398p. Bovis was 1.53 per cent lower at 580.5p, and Redrow lost 0.89 per cent to 278.25p.
Elsewhere, unhappy investors, piqued by depressing profits figures from Bradford & Bingley, turned on the banking sector. The specialist lender to the UK's buy-to-let mortgage market revealed its 2007 net profit had declined by an astonishing 48 per cent, sparking a sector-wide sell-off which pushed some of the leading names in the business to the bottom end of the market. At the close, B&B was down 23.1 per cent at 187p, while Alliance & Leicester was down almost 7 per cent to 559p.
Sector counterparts heading south included Northern Rock, which lost more than 9 per cent to 95.5p, Royal Bank of Scotland, which fell 1.27 per cent to 369.25p, and HBOS, off 1.19 per cent to 665p.
The FTSE 100 closed down 29.9 points at 5,880.1. The benchmark index was low from the start, depressed by weak financial stocks, and, later, by the Bank of England's Inflation Report. Evolution Securities' Nick Brown said that the day's news would weigh heavily on investors and traders alike, and added: "Although it is an oft-used cliché, right now it does look like a 'perfect storm' is brewing." The FTSE 250 index was lighter by 44.1 points at 9,996.1.
Among blue-chips, Marks & Spencer stoked fears about trading conditions at its stores after handing discount vouchers to more than 70,000 current and former staff. The company was reported to have told the beneficiaries to spread the vouchers, which promise up to 20 per cent off the price of clothing, food and household goods, among friends and family. Investors, increasingly concerned about the state of the retail sector, were spooked by the move which suggested the sales had remained sluggish. A sell-off eventually took the company's shares down by 2.14 per cent to 411p.
British Airways, on the other hand, fared better after Robin Hayes, its executive vice-president for the Americas, was reported to have said that business travel between the US and the UK remained robust, despite problems in the financial services industries. The company's shares gained 2.49 per cent to 299p on the back of the news.
Among small caps, the photo-booth operator Photo-Me was up after news that ex-director Philippe Wahl had increased in his stake in the company to 7.17 per cent from 5.23 per cent. The move sparked rumours about further stake building and, as some of the more optimistic speculators suggested, a prospective bid, inflating the company's share price by 15.38 per cent, or 4p, to 30p.
The software group Fidessa also had a good day. ABN Amro's decision to cut its target price for the stock, to 1,135p from 1,255p, failed to dent the company's fortunes as its share price climbed 5.45 per cent, or 47.5p, to 919p.
On AIM, RAB Capital was down after news that SRM, the hedge fund operated by the Monaco-based SRM Advisers, had upped its stake in the embattled lender Northern Rock. RAB shares closed down 1.08 per cent at 68.75p.
Gulfsands Petroleum gained after announcing it had started drilling its first development well in the Khurbet East field in Syria. This followed earlier news of the nod by Syrian authorities, sanctioning the commercial exploitation of the site, and the company's shares closed up 0.61 per cent at 163.5p.
Also on the upside, Allied Gold gained after the market learnt that it had conducted its first gold pour at the Simberi Gold project in the New Ireland province of eastern Papua New Guinea. The company's shares climbed 12.78 per cent to 37.5p.
On the downside, Carnegie Minerals saw its share price slump by 28.13 per cent to 2.875p after the Gambian government cancelled its licence to mine heavy mineral sands in the country.
And finally, Sarantel Group, which manufactures filtering antennas for mobile and wireless devices, was up after saying that it was pursuing a range of financial options. Sarantel's shares rose 14.29 per cent to 8p.