Market report: Monday close

By This Is Money
Updated: 12:24 EDT, 19 November 2007

The FTSE 100 slumped by 170.4 points - nearly 3% - after Wall Street fell sharply this afternoon, with investors bracing themselves for more bad news relating to the credit crunch and housing-market slump.

After a day spent in the doldrums the FTSE fell abruptly to close at 6,120.8, with the Dow shedding 151.36 at 13,025 points by 5pm.

Banks saw a further day of falls due to fears surrounding the property market.

Mortgage lenders were marked lower amid whispers one lender is being forced to borrow funds at significantly higher rates than anyone else.

Alliance & Leicester was down 25½p at 581½p, Bradford & Bingley 18¼p at 257p and HBOS 29½p at 730p. Royal Bank of Scotland shed a further 22½p to 404p. It's now trading on a price-to-earnings ratio of six-and-half times prospective earnings and yielding 6%.

Bucking the trend was Standard Chartered - the British bank no one has ever heard of. But it has never been short of admirers, and these days they appear to be queuing around the block, writes Mickey Clark in the Evening Standard.

Shares of Standard, which has big interests in Africa, Asia and the Middle East, climbed back above 1700p today with a jump of 15p to 1679p amid speculation that China's three biggest banks have approached the Singapore state investment bank Temasek with a view to buying its 17% stake.

The three banks - Industrial and Commercial, Bank of China and China Construction - are believed to have made a tentative approach to Temasek, which has rejected it. Dealers say the move is significant because it shows the Chinese are more willing to invest abroad. Standard Chartered has built up one of the largest branch networks in China and holds a near-20% stake in Bohai Ban, a mainland lender.

Bear Stearns warns, however, that the possible ownership of Standard Chartered by a Chinese bank could compromise its independence. It continues to rate the shares at outperform.

Temasek bought an 11.5% holding in Standard last year from the family of the late Tan Sri Khoo Teck Puat. He acquired it in the 1980s after emerging as a white knight to defend it from Lloyds TSB. The stock-market value is £23.4bn.

The rest of the banks had little to commend them. Northern Rock slumped 28.4p to a new low of 104.2p with two bids for the company rejected after they were valued at well below its stock market price tag. One broker commented: 'Northern Rock's not even worth this price. The shares are virtually worthless. It's only the open short positions keeping the price up.'

Friends Provident fell 0.5p to 156p. The life assurer had fallen sharply after its proposed £8bn merger with Resolution, down 3½p at 701p, was scuppered by a bid from rival assurer Pearl.

City speculators say it is unlikely FP will stay friendless for much longer. There is already talk of a bid from the French insurer Axa.

Burren Energy slid 173p to 1015p following the breakdown in bid talks with Italy's Eni, which had originally offered 1050p a share, valuing the oil explorer at £1.5bn. Eni subsequently raised its offer to 1200p.

Even that proved to be not enough. Merrill Lynch says Burren will now have to provide a 'robust' trading update to tell the market why it thinks the offer undervalued the company.

British Land fell 69p to 820½p despite Société Générale raising its recommendation from sell to hold and its target by 9% to 870p, on valuation grounds. The move follows a meeting between the company and analysts.

Mears Group has won an £89m council contract in Sedgefield, former premier Tony Blair's constituency, to provide housing repairs, maintenance and homes for 8,500 properties. Mears is confident of further contract wins, but the shares slipped 14½p to 247½p.

Kingfisher fell 13.3p to 160.3p after JPMorgan cut its target from 256p to 235p despite retaining an overweight rating. Evolution-moved from buy to add on the B&Q retailer, blaming prolonged underperformance.

TOMORROW'S AGENDA

• The British Venture Capital Association publishes its review of the private-equity industry. Headed by veteran banker Sir David Walker, the group has been examining transparency and accountability in the sector, to try to form a voluntary code of conduct. Sir Michael Rake, the chairman of BT and former boss of KPMG, will lead the new oversight committee.

• Europe's second-biggest low-cost carrier easyJet unveils preliminary full-year results. Rising fuel costs remain a concern, but analysts expect strong figures. Passenger numbers were up 14% in October, with similar rises throughout the year. Last month's acquisition of GB Airways added 15 planes to its fleet and landing and take-off slots at Gatwick. EasyJet is focusing on increasing the number of business travellers, who tend to make later, more expensive bookings, to 25% of customers from about 20%.