Skip to main contentSkip to navigationSkip to navigation

FTSE slide arrested

This article is more than 16 years old

After an uncertain start, the market's week-long decline was finally arrested today.

But that is not to say there was a convincing rally. Indeed the FTSE 100, remarkably, closed absolutely unchanged at 6505.1 after a volatile session which saw it lose around 50 points during the morning and gain 14 in the afternoon.

It seemed odds on at first that the index would record its fifth fall in a row following Thursday night's near 200 point drop on the Dow Jones industrial average.The market's continuing concern is the likelihood of further interest rises across the board, which pushed US Treasury bond yields higher again after they moved through the 5% level yesterday. Among other things, a rise in bond yields make shares look less attractive.

But having been the villain of the piece yesterday, Wall Street came to the rescue today. The US market regained some ground after the country's trade gap narrowed by more than expected in April, and helped pull UK shares back from the edge.

Simon Wallace, an economist at the Centre for Economic and Business Research, said: "The US trade balance on goods and services narrowed more than expected in April to a deficit of $58.8bn. Market expectations had been for the deficit to narrow more slowly and reach only $63.0bn.

"The driver of today's fall in the deficit came from a sharp fall in the value of goods being imported into the country.The slight increase in exports this month will provide a little comfort in the US that the weakness of the dollar and faster growth in China and Europemay help to support the economy during the current slowdown. However, although the reduction in imports may just be a monthly fluctuation, if this trend continues then this is likely to indicate that the consumer is starting to tighten their belts, which will have much wider ramifications for the economy at large."

Rate-sensitive stocks were among the major fallers, with asset management group Invesco down 3.5p to 579.5p and Schroders falling 26p to £13.09.

Continuing falls in base metal prices hit the miners. Vedanta Resources lost 38p to £14.65 and BHP Billiton, which had been pushed higher yesterday on vague talk of interest from China, was 18p lower at £12.68. Lonmin however rose 70p to £37.87.

The can maker Rexam fell 14.5p to 511.5p as it said it was in talks about buying the plastics division of US group Owen-Illinois, which analysts said could fetch up to $1.8bn. Seymour Pierce called the deal an investment too far and said it would probably need to be funded by a cash call of between £250m and £550m. It has cut its recommendation from buy to hold.

Among the gainers, B&Q owner Kingfisher recovered 3.25p to 238.25p following this week's placing of 57m shares by Morgan Stanley.

The recent strength in the oil price lifted the majors, although with a $1 (51p) dip in the price to just above $70 a barrel this morning, they came off their best levels. Still, Royal Dutch Shell A shares rose 16p to £19.49 and BP was 1p better at 563p. Shell in particular was helped by an upbeat Merrill Lynch note.

Royal Bank of Scotland added 9.5p to 657p on suggestions it might lose out to Barclays in the battle for ABN Amro, and thus avoid overpaying for the Dutch group.

Pharmaceuticals giant GlaxoSmithkline slipped back after problems with its Avandia diabetes drug, down 3p to £12.96.

But Jeremy Batstone-Carr of Charles Stanley repeated his buy rating on the shares despite the recent claims of possible heart problems associated with Avandia.

He said: "Given the [recent] travails why do we retain our buy recommendation? Firstly, we believe that the chance that Avandia will be taken off the market is much lower than the sharp move in the share price suggests and compensation claims thus avoided.

"Second, GlaxoSmithkline continues to boast a robust late stage pipeline and the conversion of pipeline assets to future revenues is still under-appreciated by the market.

"Third, if it so wished (and it does not seem likely in the very near-term) GlaxoSmithkline could 'do an AstraZeneca', gear up aggressively and by making use of existing strong cash generation, return as much as 75% of current market capitalisation to shareholders in less than ten years.

"Finally, the shares trade off just 12x 2008 earnings, a 20% discount to the European pharmaceutical sector average whilst offering a supportive 4.0% dividend yield."

Among the second-liners, engineering group FKI recovered some ground. Yesterday the shares slumped on disappointment about possible bids for the company, with only one remaining predator seemingly still in the fray.

Today FKI added 2.25p to 121.75p as UBS raised its price target from 115p to 125p, although the bank maintained its reduce recommendation.

Music retailer HMV added 4.75p to 110.25p on hopes of an imminent sale of its Japanese business, which could fetch up to £165m. Six bidders are said to be in the running, including video rental business Culture Convenience.

Garden centre group Dobbies jumped 145p to 1492.5p after Tesco made a surprise recommended offer for the company at £15 a share. Tesco went into the market this morning and snapped up 617,626 shares in its target.

A major casualty was e-learning specialist SimiGon, which came to the stock market last November. Its shares slumped 40.5p to 55p after it warned revenues for the year would be significantly below expectations, while profits would not match last year's level.

"This serious disappointment, especially given it has come so early in the career of SimiGon as a quoted company is bound to have a severe impact on the share price, and we think it could take some time before confidence is restored," said Panmure Gordon.

Finally, the oil and gas explorer Meridian Petroleum confirmed it was raising more cash. Its shares fell 2p to 14.75p and placed new shares at 11p each to raise £1.78m before costs.

Most viewed

Most viewed