Market report: Monday close
The misery continued to pile on for shareholders of Northern Rock, which was forced to seek emergency funds from the Bank of England last week.
It shares slumped 155¼p, 40%, to 282¾p today, making Northern the biggest blue-chip loser. More than 3.5m shares changed hands during the first few minutes of trading. Talk of a white knight emerging to bid for Northern Rock does not appear to cut the ice in the City.
Northern Rock is not the only mortgage lender suffering the fallout from the credit crunch. Several brokers took their red pencils to former building societies today on the basis that their shares will also be hit in the short term.
Alliance & Leicester slumped 133½p to 739½p by lunch time after Merrill Lynch downgraded the shares from neutral to sell because it reckons they are looking expensive.
The shares suffered a further slump to 587p in the last half an hour of trading, representing a massive slump of 33% for the day.
Citigroup has also cut from hold to sell and slashed its target price from 975p to 780p to reflect the liquidity crunch. It has reduced its earnings forecast for next year and 2009.
A few months ago, business momentum appeared to be improving for the bank with improved performance in commercial, fewer drags on revenue and stable margins. But the broker warns: 'The negative macro picture is likely to play out to the detriment of A&L shares.'
A&L currently trades on almost 10 times its new 2008 earnings estimate and 2.2 times tangible book value. The shares have traded at a premium to other banks for some time on the basis that it has been seen as a possible takeover candidate. But Merrill reckons that is unlikely in the current environment, especially when there is no shortage of UK assets for an interested buyer.
Citigroup has also cut Bradford & Bingley, down 44&frac;34p to 285p, from hold to sell while lowering its sights on the shares from 440p to 300p, warning that the liquidity crisis is likely to exacerbate an already deteriorating outlook for the UK housing market.
Other losers included HBOS, down 47p at 813p, and Barclays, 15p off at 581p.
The sell-off in Northern Rock set the tone for the rest of the market with investors clearly worried more bad news may emerge. As a result, the FTSE 100 index closed down 106.5 points at 6182.80, although brokers described selling pressure as minimal in thin trading conditions.
Citigroup has downgraded Holidaybreak, down ½p at 786½p, from buy to hold and lowered its target 940p to 870p.
Although the company has issued a solid trading statement and expects 'a satisfactory outcome for the full year', it is a victim of the credit crunch, with its interest referenced to a three-month Libor.
Citigroup said that on the plus side, Holidaybreak's sales are up 7% on the same point last year, with adventure travel sales 4% ahead. The broker said the company has implemented a cap-and-collar arrangement on its interest, which the broker said could affect its interest bill for full-year 2008 by a spread of £2.2m.
Share trading in the Far East this morning was subdued with Tokyo closed for a national holiday. Prices in Hong Kong finished the morning session slightly lower as investors locked in profits in property after a recent run-up on hopes of a US interest-rate cut.
Trade was described as cautious after a rate increase in China and ahead of the US Federal Reserve meeting tomorrow, but dealers say the market may recover if a government land auction today delivers a strong outcome.
Mainland insurers gained with higher interest rates in China expected to boost their return on investments, while Chinese banks were mostly weak. China announced on Friday that it is raising its benchmark lending and deposit rates by 0.27 of a percentage point, in the fifth rate increase this year, to combat surging inflation.
The Hang Seng index fell 102.96 points to 24,795.15.
Northern Rock: Everything you need to know...
null
Taking stock: Sectors at a glance
BANKING AND FINANCE
There's more to private equity than 'mega-buyout houses' like Blackstone, KKR and Carlyle. Dresdner Kleinwort has put together a convincing argument in favour of 3i, which it believes to have had a very strong first half. 3i's differentiated portfolio and 2.5 times return on capital makes it a buy with a target price of 1390p.
BUILDING AND PROPERTY
Building supplies and plumbing specialist Wolseley will be in the spotlight on Friday when it reports full-year results. Its exposure to the US housing market means extra harsh scrutiny. The shares have underperforming the FTSE 100 by 8% in recent weeks but Credit Suisse reckons it could still disappoint and has lowered its target to 850p.
CONSUMER
Food producers, whether grocery, like Unilever and Premeir Foods, or dairy, should be able to pass on higher commodity prices to customers, says Numis, and some may even be able to increase margins at the same time. It notes that a Hovis loaf has gone from 55p to 105p in five years, demonstrating customers can and will pay more.
ENGINEERING
BAE will remain in the spotlight with analysts revisiting their recommendations following a very successful arms show in London last week. Barclays is urging clients to buy following a positive meeting with management, where they seemed 'confident' of the big 72-aircraft order with the Saudis being signed soon.
HEALTH
Hip, hip, hooray! for Smith & Nephew. Last month's limited recall of replacement hip parts will have no material impact on profits and now offer an attractive entry level at 570p. Dresdner Kleinwort says its wound care business has not yet been fully recognised by the market and reckons the target price should be 700p.
INDUSTRIALS
First it was Airbus's A380 Superjumbo that was plagued with delays. Now experts are predicting arch-rival Boeing's eco-friendly Dreamliner 787 could be late. Boeing bosses claim it will make up the estimated four months' delays in the programme but analysts think not, as delays in parts supplies are unavoidable.
LEISURE
Pubs can survive the smoking ban, but what about nightclubs? Thursday will be the first chance to hear from the country's largest operator, Luminar, how its late-night venues are faring without fags. Luminar has been experimenting with air-conditioning scents to disguise the smell of sweat and stale beer hitherto disguised by smoke.
MEDIA
Wilmington shareholders can expect good news from Friday's results as operating profits climb to £16.5m. The company, which provides information for business and professional markets, looks like a good buy after disposing of publishing support business WDIS to concentrate on its highly profitable legal and healthcare segments.
NATURAL RESOURCES
Investors will be hoping to hear more about Venture Productions' cquisition strategy alongside what are expected to be disappointing production figures tomorrow. 3i and Arclight have invested £200m in a venture to fund a consolidation strategy in the North Sea but new debt facilities will give it evenmore firepower.
RETAILING
Check out Dunelm's results on Wednesday as profits are expected to exceed £40m. Despite predictions of a deterioration in like-for-like trends at the home furnishings store and recent share price weakness, analysts retain their buy rating, emphasising the chain's growth potential and high returns.
SUPPORT SERVICES
Printing group Communisis offers good value now that the benefits of the structural changes are starting to flow, and the shares are due a re-rating, say analysts at IS Research. They are initiating coverage with a buy recommendation and a 100p target, representing a 30% increase to the 80p share price.
TECHNOLOGY
Panmure Gordon is urging clients to buy into cattle-breeding technology company Genus ahead of tomorrow's final results. Despite an anticipated £3m adverse dollar impact, profits should be up by almost 50% to £22m. The shares look good value, particularly with earnings forecast to grow by 33% next year.
TELECOMS
A new high-resolution satellite is being launched tomorrow that will greatly improve the pictures available on Google Earth, the programme that allows viewers to see their house from miles high. DigitalGlobe's new craft will offer resolution down to half a metre and can collect 600,000 square kilometres of imagery a day.
TRANSPORT
Business-only transatlantic airline Maxjet is expected to announce soaring sales when it unveils first-half results tomorrow. Load factors have almost doubled to 83.1% since January, and Maxjet's strategy of adopting the one-way pricing and point-to-point flying pioneered by the European lowcost carriers appears to be paying off.
UTILITIES
Energy supplier Centrica confirmed that it has bought the UK division of America's Newfield Exploration for $486.4m (£242.4m) in a deal which gives it another slice of the North Sea's gas reserves. Centrica is keen to increase its own gas supplies in order to reduce its reliance on volatile wholesale markets.
Most watched Money videos
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- Fiat pledges to cease grey car production as they launch new EV
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- Mercedes has finally unveiled its new electric G-Class
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- Mail Online takes a tour of Gatwick's modern EV charging station
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Land Rover unveil newest all-electric Range Rover SUV
- Blue Whale fund manager on the best of the Magnificent 7
- Mini celebrates the release of brand new all-electric car Mini Aceman
- How YOU can cash in on the stock market 'feeding frenzy':...
- Boost for City as BP vows to keep its London listing -...
- Bungalow wars! Downsizers are in bidding battles against...
- Take That concert at Co-op Live has moved venue. Can I...
- Octopus Energy valuation grows to more than £7bn as...
- BUSINESS LIVE: BP profits slump 72%; Wayve raises more...
- I wanted to return £12,000 of wedding clothes from...
- BP profits hammered by lower energy prices
- Retail sales hit by wet weather and early Easter bank...
- Online trading platform Plus500 suffers fourth...
- MP condemn woke ESG debanking as 'legitimate' firms are...
- MARKET REPORT: Rate hopes send Footsie to another record...
- Big Four auditors fined £9m for the London Capital &...
- The 10-minute rule that could save you from a parking fine
- House prices flat in April says Halifax, but buyers seek...
- Rolls-Royce Cullinan Series II is here - and the brash...
- I'm dying of brain cancer at 39. But my insurance won't...
- Saudi Aramco to pay £100bn dividend to help fund city of...