Yesterday's trading: Technical glitch hinders market

By Karl West
Updated: 03:00 EDT, 8 November 2007

Confusion reigned on the market last night as the technical gremlins did their best to put the kibosh on trading on the London Stock Exchange.

Incorrect prices flashed up on screens, pushing up some stocks and indices that had previously been mired deep in the red.

Traders were left scratching their heads wondering what had gone wrong as data screens across City dealing floors were still flashing well after normal close of play.

The glitch was down to a technical pricing problem that saw the closing auction period extended for more than an hour, long after most traders have gone to the pub. The LSE confirmed there was an issue and blamed the Infolect service, a real-time data channel.

It is the first time the exchange has failed to complete settlement of trades for a session and will be a huge embarrassment for Europe's biggest equity market, which recently completed the acquisition of its smaller Italian rival, Borsa Italiana.

Britain's blue-chip index of 100 top stocks fell 89.8 points to 6,385.1 on escalating fears that another high-profile casualty could join Northern Rock, down 12.1p at 152p, on the sick list.

The Footsie's fall was exacerbated by a plunge in the Dow, down 251.3 at 13,412.5 by the UK close, fuelled by concerns that more Wall Street banks, such as Morgan Stanley, are about to write down billions in assets.

The grey storm clouds gathering over British Energy, down 40p at 515p, had a silver lining for rivals of the crocked nuclear power generator. International Power charged to the top of the Footsie, up 14¾p at 476¾p, as investors dumped their stock in BE after it discovered corroded wire in a reactor at its Heysham 1 plant, similar to a problem at its Hartlepool reactor.

BE, which generates around 20% of Britain's electricity, now has two of its eight stations down and gave no guidance as to when they will be up and running.

UBS analysts said: 'Assuming both stations are off for the remainder of the financial year, we would expect the loss of around 8 terra-watt hours of output, worth around 12½p a share off both value and 2008 estimated earnings.

'The outages are likely to result in increased market share for gas generators and may have a small positive impact on power prices due to tighter margins ... We would expect Drax to react positively on this news.'

Sure enough shares in Drax, which operates Britain's biggest coal-fired power station, climbed 18½p at 718p to within touching distance of the FTSE 250 summit. Back in the top tier, Scottish & Southern Energy was another beneficiary of the BE bounce, 14p stronger at 1559p.

Resources companies are enjoying a bit of a boom time at the moment. Rising prices and soaring demand from emerging economies in India and China are contributing to the resurgence of the oil and gas, and mining sectors.

Gas explorer BG Group was 4½p stronger at 901p, while Royal Dutch Shell added 20p at 2040p as chief executive Jeroen van der Veer said the group wanted to build a 'huge-scale long-term liquid oil and gas project' with local companies on the remote Yamal peninsula, north of the Arctic Circle in Russia.

Russia's gas export monopoly Gazprom holds most of the gas reserves on Yamal, but has yet to start production and build pipelines to evacuate gas from the peninsula.

Anglo-Australian miner Rio Tinto was boosted 16p to 4,350p by market talk that it is a bid target for rival BHP Billiton, a 19p faller at 1756p.

Property group Liberty International was another top-tier casualty, down 27p at 1092p, after Goldman Sachs reiterated its sell rating on the stock following Tuesday's lacklustre third quarter results. The commercial property sector is viewed by investors as being overexposed to the tightening of lending conditions among the banks, which is expected to impact on future deals.

Down in the second liners, bluetooth technology firm CSR climbed 74½p to 664½p after dialling up in line third quarter pre-tax profits of £27.3m, up from £24.8m a year ago. Brokerage Landsbanki retained its buy recommendation on the stock, and Panmure Gordon said it was an 'encouraging' statement, and although it remains a buyer of the stock it reduced its share price target to 750p from 1000p.

Bumping along the bottom of the mid-tier fallers were fund managers and private client wealth managers who fell victim to the wider fears surrounding the financial market crisis. Rathbone Brothers, down 111p at 1195p, St James's Place, a 27p faller at 330p, New Star was 22½p weaker at 288¾p, and Hargreaves Lansdown fell 12¾p at 225¼p.

• Aim oil explorer Gulf Keystone Petroleum looks worth a flutter after it signed a partnership deal with Hungarian group MOL on a joint production sharing contract with the Kurdistan Regional Government. The pair have been awarded two blocks to explore in the Iraqi region of Kurdistan, one of which has been rated as low-risk for exploration. The news clearly caught the attention of investors, with 8m shares changing hands yesterday, pushing Gulf's shares up 1½p at 38½p.