Yesterday's trading: Biggest drop in five years
Pass the tin hat. Already punch-drunk from Thursday's bout of heavy selling, dealers in London will be braced for another onslaught today following a disastrous session on Wall Street overnight.
The dicky Dow, which only last week hit an all-time high of 14,000, crashed 412 points at one stage to 13,372, its biggest fall since February, on growing fears that the worst of the risky US sub-prime mortgage crisis has yet to hit home.
The decision by Wells Fargo, the secondlargest US mortgage lender, to close its subprime wholesale lending business, which processes and funds loans for third-party brokers, sent shockwaves right through The Street of Dreams.
US number crunchers believe there is a overhang of £1,000bn of mortgages with adjustable rates which have yet to be reset. Many borrowers could see payments jump by 50%, or even double.
Several investment banks exposed to the sub-prime market are running scared. They are staring at heavy losses and will therefore have to put a freeze on demand for other loans and corporate debt. It all points to a severe credit crunch which could put an end to the great global private equity takeover boom.
Renewed concerns about a rising $76 a barrel oil price and worries that UK interest rates could soon be on the rise again also helped turn dealers' screens a sea of red. The fragile Footsie fell away sharply to close a further 203.1 points down at 6,251.2, its biggest points fall for five years to stand unsteadily 7.1% below its seven-year June high of 6,732.4. The FTSE 250 crashed 382.5 points to 11,033.4 as selling gathered pace when the US market opened in the doghouse.
Last week's 14,000 all-time closing high on Wall Street seemed a distant memory as the dicky Dow plummeted 222 points to 13,562 in early trading.
The acrid smell of burnt fingers, elbows in some cases, wafted around dealing rooms as shares of many of the recent takeover favourites took a mother of a pasting. Let's face it; anyone who was planning a debtfunded takeover will now have to rework their sums based on higher lending rates. There's a good chance predators will now just walk away.
Intercontinental Hotels, in which the secretive Barclay Brothers own 10%, dropped 90p to 1109p. Leisure giant Whitbread, forever rumoured to be on Starwood Capital's radar, lost 75p to 1675p. Betting shop giant Ladbrokes pulled up lame at 405¼p, down 23¾p. Mining giant Anglo American crumbled 187p to 2853p.
Sellers continued to be all over the property sector like a rash. Dearer credit fears dragged Land Securities down a further 93p to 1619p, British Land 62p more to 1204p, while an uninspiring interim statement left Liberty International 59p down at 1026p.
Worries about the market's deteriorating performance hit fund managers Schroders, 70p down at 1195p, and Prudential, 38p off at 662p. Investment manager Rathbone Bros lost a 65p gain and closed that much lower at 1235p despite slightly better-than-expected interim results.
Hat Pin jumped 8½p to 109½p as analysts gave the thumbs up to its £6.5m acquisition of Executive Access India, a leading executive research firm in India. The deal will be earnings enhancing in the first year and provides exposure to a number of sectors in the high growth Indian financial services and technology markets.
Investors, including entrepreneur Bob Morton, were more than happy to take stock at 100p in a £5.5m placing which helped fund the deal. Arden Partners says earnings are set to grow at double digit rates over the next three years.
Former dot com favourite BATM edged ½p higher to 35p following an upbeat AGM. Shareholders were told that first-half sales growth would be 15% and a new contract has been won with NTT DoCoMo, Japan's largest telecom operator.
Japanese biometrics firm Secure Design collapsed 10p to 20p after warning that firsthalf revenue will be significantly below internal expectations. Disappointing annual profits left Access Intelligence 2p cheaper at 4½p.
Considering the surrounding malaise, Tawa's debut on AIM was impressive. Placed at 125p by broker KBC Peel Hunt, shares of the only listed consolidator of non-life insurance run-off portfolios raced ahead to 137½p, a premium of 12½p.
• Penny share punters should be interested in Uranium Prospects, at 5p, when dealings get under way on the thriving PLUS Markets. It does exactly what it says on the tin and is currently mining 170,000 acres of land in Canada for uranium. Joint ventures deals are in the pipeline.
Investment group Addworth (unchanged at 3¼p) owns 16%.
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