Market update - 7 January

The FTSE 100 was down 60.91 points at 4578.24 while the FTSE 250 fell to 6823.16, down 55.85 points, at 11:39 am this morning. Scottish and Southern Energy was the weakest among the blue chips, losing 7.21 per cent or 91p to 1172p after placing around 40 million new shares at 50p apiece.

The energy group said that the cash raised from the placing – expected to be in the range of £450-500m – will be used to bolster its balance sheet. Part of the proceeds will also be channelled to the group’s £6.7bn five-year investment programme.

Moving up

Private equity group 3i was the strongest on the FTSE 100, up a spectacular 14.69 per cent or 50.25p at 392.5p. Traders attributed the gains to two factors.

Citing the stock’s underperformance during the Christmas period, they said some of the strength was down to bargain hunters seeking to capitalise in the losses.

Beyond that, they pointed to signs of reduced stress in the credit markets. “Inter-bank borrowing has improved – its still not what it was before, but it’s looking better. The read across for 3i is that [going forward] it might be able to raise money more easily,” one trader said, adding,

“The improving sentiment is pushing shorts out of 3i.”

Marks & Spencer, at second place on the leader board, also fared well this morning, gaining over 5 per cent or 12p at 250.75p after posting a grim, but, given the current economic climate, better than expected trading update.

“Today’s third quarter like-for-like sales [for the 13 weeks to the 27th of December] are bad, given the weak comparables from the poor Christmas a year ago, but not quite so bad as we expected, thanks to a late spending surge [in the run up to Christmas],” said Nick Bubb, the widely followed retail analyst at Pali International,

“We looked for – 10 per cent for non-food, but the outcome was just under – 9 per cent and just over – 5 per cent for food (where we looked for – 7 per cent). But the overall gross margin fall of 175 basis points flagged for the full-year is rather worse than feared, implying well over – 200 basis points in the second half because of two ‘one day sales’ and the food price promotions.”

Moving down

Specialist finance group Cattles slumped to 26.5p, down 10.17 per cent or 3p after announcing plans to reduce jobs and new lending volumes in 2009.

Elsewhere, Standard Chartered was the back foot, down 5.46 per cent or 54.5p at 944.5p, after NCB Stockbrokers downgraded the stock to “sell” from “reduce”, citing the slowdown in emerging markets in particular and the rising bad debts in Asia and the Middle East in particular.