Market Report: AB Foods boosted by talk of demerger from Primark

The market veered sharply lower last night, but Associated British Foods (ABF) bucked the trend amid rumours that it was mulling a demerger of its Primark division.

The stock gained 3.4 per cent to end the session up 35p at 1,051p, against a 1.5 per cent decline for the blue-chip index as a whole. The idea of a demerging the retail business has been mooted in the past, but attracted no support from traders last night, who attributed the gains to positive feedback from a recent meeting in the City.

ABF's finance chief, John Bason, met Jefferies earlier this week, and the brokerage was said to be pleased with what it heard, sparking interest in the company's shares.

Overall, equities were spooked by movements on the bond markets, with the FTSE 100 sliding below the 5,200 mark, losing 78.89 points to 5,155.95. The FTSE 250 closed at 9,700, down 125.24 points. Yields on benchmark UK gilts tested record lows following some dovish comments from Martin Weale, the newest member of the Bank of England's rate-setting Monetary Policy Committee, who said the risk of the UK sliding back into recession could not be ruled out.

The market movements, which came against the backdrop of continued demand for US Treasury bills and German Bunds, pointed to a growing aversion to risk, sparking concern across the stock market.

Signals from Asia, where the yen struck a 15-year high against the US dollar, and Wall Street, where some grim housing data undermined sentiment, also dampened the mood in London last night.

The sell-off was almost all-encompassing, with just a handful of blue chips managing to book gains. Even defensives, which tend to rise as the market loses its appetite for risk, were caught in the crossfire. The precious metals miners African Barrick Gold managed to edge up by 4p to 567.5p, but the pharmaceutical groups AstraZeneca and GlaxoSmithKline were marked down by 61.5p to 3,233.5p and by 27.5p to 1,200p respectively. The utility Scottish & Southern Energy fared better, closing broadly unchanged at 1,127p, up 1p last night.

There was speculation about errant trades in a number of companies, with some blaming so-called fat fingers for sudden spikes and slumps which triggered brief automatic suspensions in five different stocks.

United Utilities touched a sudden high of 620p, up more than 9 per cent, before reverting to 564.5p, down 2.5p, at the close, while Hays suffered a swift decline to 82.5p, down nearly 10 per cent, before recovering to 90.5p.

BT and Next also suffered sharp, and seemingly inexplicable, falls before recovering. BT was marked down by as much as 9.2 per cent before rebounding to 135.2p, down 0.3p, while Next went south by nearly 8 per cent before snapping back to 1,944p, down 26p or around 1.3 per cent. Northumbrian Water went the other way, spiking by more than 5 per cent before relaxing to 320.6p, up 1.8p, by the close.

Elsewhere, the miners pared gains as metals prices lost ground, with copper touching a one-month low on worries about the demand outlook. Kazakhmys, for instance, fell to 1,103p, down 45p, while Antofagasta lost 15p to 1,012p after trimming its annual production target. Xstrata, which launched a recommended cash offer for the Australian-listed iron-ore specialist Sphere Minerals, was 29.4p worse off at 989p.

Vedanta Resources was the weakest of the blue chips, shedding more than 7 per cent or 155p to 1,882p after the Indian government rejected the miner's plans to extract bauxite in the eastern state of Orissa. The stock was also the subject of worries about possible hurdles to Vedanta's planned acquisition of a majority stake in Cairn India, the oil prospector focused on the desert state of Rajasthan.

Wolseley, the building materials group which bounced after Numis analysts urged clients to wade in earlier this week, fell back, easing by 67p to 1,239p on the read-across from Ireland's CRH. The latter warned that its earnings will fall amid weakness in the American economy, knocking the mood around Wolseley, which has extensive operations on the other side of the Atlantic.

Of the banks, HSBC, which was reported to have weeks to mount a firm offer for a controlling stake in Nedbank, was 9.3p behind at 629.9p, while Standard Chartered fell to 1,687.5p, down 29p. Barclays was 10.1p lighter at 309.15p, while the Royal Bank of Scotland was marked down by 1.6p to 44.1p last night.

United business Media was only slightly lower, easing by 3p to 553.5p after JP Morgan Cazenove added the stock to its analyst focus list. The broker said the events and publishing group was primed to outperform, highlighting factors such as the company's exposure to fast-growing emerging markets and the stock's undemanding valuation.

UBM also stood to benefit from its exposure to the events business, which makes up around 50 per cent of profits, and which is "not disrupted by the media sector['s] move to digital", JP added, reiterating its "overweight" view and revising its target on the stock to 675p.