Markets rattled by blunt Ben

By Geoff Foster for MailOnline
Updated: 02:47 EDT, 7 June 2006

BRING back Alan Greenspan. Dealers had grown used to the great man gently pulling the strings at the US Federal Reserve for 19 years.

But new chairman Ben Bernanke, who took over in January, is proving to be a different kettle of fish. He says what he thinks and world stockmarkets are finding it difficult to adjust.

After telling the American Bankers Association on Monday that the Fed needed to be vigilant and make sure inflation stayed under control, markets interpreted that as him saying the Fed had not finished raising interest rates yet.

It was red rag to a bull - on Wall Street, the Dow Jones Average plummeted overnight, before going on to fall close to the 11,000 mark yesterday.

London only had one way to go. The fragile Footsie fell 105.5 points before closing 92.3 points lower at 5,669.8, while the roller coaster FTSE 250 dropped 276.7 points to 9,075.2.

Mining stocks led the retreat with broker Numis proclaiming that higher US interest rates and a slower economic environment would have a negative effect on the sector.

Xstrata was additionally aggravated by growing concern about its contested offer for Canada's Falconbridge. It was sold down to 1915p and ended 119p cheaper at 1939p.

Anglo American, the world's second biggest miner, lost 104p to 1992p, while BHP Billiton declined 46½p to 992½p, Antofagasta 90p to 1959p and Rio Tinto 111p to 2760p.

Miners Lonmin (down 152p to 2413p) and Vedanta Resources (off 126p to 1285p) fell victim to selling, but both should still win promotion to the Footsie today.

Their elevation will come at the expense of telecoms underperformer Cable & Wireless, 1½p easier at 102¾p, and bookmaker Ladbrokes, 8½p down at 387p.

Power generator Drax, 5p lighter at 818p, is also set for promotion to the FTSE big board today. The company only joined the stock market in December 2005, but the shares have surged amid rising energy prices. Daily Mail publisher DMGT, down 20½p at 623p, is seen likely to be ejected.

J Sainsbury slipped 4p to 315¼p after Panmure Gordon advised clients to sell. Analyst Philip Dorgan has a target price of 260p and warns that the supermarket group's low margins mean that it cannot fund organic growth without destroying value, nor can it release value for its property portfolio.

The widening sales gap with rival Tesco (¾p easier at 320p), now at £13bn in the UK, has affected margins and it will continue to do so, as the gap widens by another £6bn over the next three years.

Alliance Unichem closed a healthy 11½p higher at 970p and Boots the Chemist 1½p at 738p after both sets of shareholders were sent final merger documents.

Spreadbetting firm IG Group drifted 10¼p lower to 213½p but should be buoyed by a bullish report on the industry from the Cass Business School.

It predicts that the number of people in the UK with a spreadbetting account could more than double from its current level, hitting 1m by 2011.

Aim-listed drugs company Neutec Pharma soared 422¼p to 925p after revealing it is in takeover talks. Neutec is currently developing a couple of promising products designed to fight hospital superbugs and an industry heavyweight could be forced to pay a tasty premium to take control.

AstraZeneca (25p lower at 2889p) recently acquired Cambridge Antibody Technology for a 67% premium.

Rumours that its accounts will be delayed sparked renewed nervous selling of iSoft, 3½p down at 82¾p.

Excellent interim results prompted a 33p gain to 733p in chemicals company Victrex.

Synergy Healthcare advanced 7¾p to 472¼p after better-than-expected results and an order book up 17% to £600m. Brewin Dolphin says the stock is undervalued and has a target

price of 600p. International Molybdenum crashed 2¼p to 8¼p following the shock resignation of chief executive Graham Mascall to pursue other interests. Galahad Gold, which owns 77.9% of IM, held at 9¼p.

Profit-taking following the results left Glotel 1½p easier at 86p. Sean Yazbeck, a director of business development at the recruitment company, this week won the American version of 'The Apprentice'.

Vimio, a provider and developer of live television, firmed 2½p to 116p following a collaboration agreement with US computer giant Microsoft, which will provide Vimio with access to its multi-billion dollar research and development programme and research laboratories.

Telecom Plus buzzed 9½p higher at 116p after the low-cost multi-utility supplier said it plans to launch a new range of broadband packages later this year.

• CONTRACTS continue to flood in for builder Alfred McAlpine, 7p off at 451p. It has won its largest Irish facilities management contract to date with the Bank of Ireland worth in excess of £80m over an initial seven-year period. It follows hard on the heels of a £50m-per-annum contract with Mapeley announced in March. Oriel says the sheer size of the contracts leaves the risk on the upside to forecasts 2007.