Market Report: 'Tobin Tax' proposals help financial stocks fall

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The Independent Online

The prospect of a financial transaction tax meant investors were recoiling in fear from a number of stocks last night, including the interdealer brokers, despite reassurances that the UK would veto such a move.

Icap and Tullett Prebon dropped 16.5p to 428p and 15.5p to 354.3p respectively after the French President, Nicolas Sarkozy, and German Chancellor Angela Merkel announced the proposals late on Tuesday following a summit between the two on the eurozone crisis. Sarkozy has called for such a levy – known as a "Tobin tax" and attacked in the past by the European Central Bank president, Jean-Claude Trichet – before, but Merkel has now lent her support to the idea.

Numis Securities' James Hamilton, however, said that since the tax would "disproportionately fall on the UK with the revenues being spent in Europe... it would seem obvious that the UK would utilise its veto and reject [it]". If this happened, he suggested, it would actually be "positive for the UK execution businesses as what little trade takes place in Paris and Frankfurt could relocate to London".

Yet it was not enough to stop the financial stocks falling, as the spreadbettor IG Group slipped 15.8p to 410.9p while the asset managers Hargreaves Lansdown – down 14.7p to 443.3p – and Ashmore – down 11.1p to 366.2p – were also knocked. Another on the slide was the London Stock Exchange, which fell 24.5p to 846p, though traders said its share price was generally likely to receive support from the bid speculation which has swirled around the bourse in recent months.

It was not the only aspect of the summit between Sarkozy and Merkel which proved disappointing for the markets, with no increase of the eurozone rescue fund or news on a common eurozone bond. As a result, the banks were suffering, with Royal Bank of Scotland shifting down 0.98p to 24.75p and Lloyds Banking Group dropping 0.42p to 32.84p.

Meanwhile, Barclays plummeted 7.65p to 173.95p in the wake of reports that its star commodity trader Todd Edgar and his team are leaving the company, which is in the process of cutting back its investment-banking operations.

It looked as if for the second session in a row the FTSE 100 was going to recover from an early drop and finish ahead, as a strong opening in the US prompted it to swing up. Yet with figures showing a rise in unemployment, the benchmark index was unable to maintain the rally and closed 26.03 points behind at 5,331.6 – its first losing day in five sessions.

GKN shot up 4.1p to 202.5p following the news that the engineer was being included in the MSCI United Kingdom index. MSCI made the announcement late on Tuesday, and it also confirmed the removal of Argos owner Home Retail, which fell 3.5p to 133.2p on the mid-tier index.

The initial reaction to its $10bn approach in June for Foster's may have been mixed, but SABMiller advanced 21p to 2,139p after deciding to go hostile with its approach for the Australian brewer. Investec's analysts said they remained "qualifiedly positive on the deal", claiming that the owner of Grolsch "clearly [feels] confident... they can transact at the initial price, eliminating some downside risk of overpaying".

The top-tier index was being weighed down by a number of stocks going ex-dividend, with Standard Life – down 10.9p to 201.5p – and British American Tobacco – down 45.5p to 2,738.5p – among those losing their payout attraction. Also in the group was Fresnillo, yet the precious-metals producer still finished in pole position, moving up 118.37p to 1,966p as the price of gold stayed near its recent record highs.

Also shrugging off the fact it was trading ex-dividend and ending up in the blue was Moneysupermarket.com after the price-comparison website ticked up 1.2p to 108.7p on the FTSE 250. Numis's David McCann helped by reiterating his belief that it could be an attractive takeover target for either a search engine or private equity, as the analyst reiterated his "add" recommendation.

Betfair pushed up 27.5p to 640p, with traders pointing to reports from across the Atlantic claiming the US is getting closer to legalising online gambling in the country. However, Bwin.party – which was the subject of vague bid speculation earlier in the week – managed to creep forwards only 0.8p to 115p.

Down on the Alternative Investment Market, Eros International edged up 2p to 210p after the Bollywood film company revealed it had signed a number of distribution deals around the world. As well as a tie-up in Japan, the group also announced a 100-film deal in Burma and plans to launch a range of subtitled DVDs in Romania.

Elsewhere, Matra lost nearly a third of its share price, sinking 0.45p to 0.98p, as the energy explorer announced it had shut in one of its Russian wells and that it also needed more funding.

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