Market report: Wednesday close
Stock market investors are suffering the worst start to a new year since 1978, with share prices on the major bourses already nursing hefty falls.
The word from traders is that things are likely to get worse. Today, investors had to endure another helter-skelter performance as shares slumped to their lowest since October 2006 as the fallout from the credit crunch reverberated throughout the Square Mile.
The FTSE 100 index dived back below the 6000 level. It was down 117 points at one stage but later reduced the loss to 82.7 at 5942.9. The deficit during the past couple of weeks is 478.2 points, or 7.4%, but London's performance is still better than that of some of its main competitors.
Overnight New York's Dow Jones fell 2%, extending its loss on the year to date to 5.75%. But Tokyo has fallen 1803 points, or almost 12%, and Hong Kong is also off 12%, or 3363 points.
Wall Street's sell-off followed news of further write-offs after record fourth-quarter losses at Citigroup.
Trading conditions in London were described as thin, with brokers anxious to establish new support levels. But while share prices are likely to rally short-term, dealers reckon further sell-offs are anticipated longer-term.
Some of the biggest losses were among the miners, which have acted as a prop for the rest of the market for so long. Cazenove has repeated its overweight rating on the miners ahead of the annual reporting season, although it concedes that despite the strong performance of the shares during 2007, reported earnings are unlikely to be anywhere near as spectacular.
The broker blames rising costs, adverse currency movements and anaemic volume growth. It also remains relaxed about any pending global economic slowdown. Antofagasta fell 43p to 589½p, with Vedanta Resources 105p cheaper at 1885p, and Kazakhmys, 74p lower at 1193p.
United Business Media gets the red card from JPMorgan in its review of professional publication shares for 2008. It has downgraded its rating from overweight to neutral, but slashed its target from 950p to 655p, warning it will suffer from the poor economic outlook. The broker also sees less scope for cash returns in the near future.
Meanwhile, Morgan Stanley is urging clients to switch out of Reed Elsevier, down 15½p at 598½p, and into Pearson, owner of the Financial Times. The broker has raised Pearson, ½p lower at 644½p, from equalweight to overweight and its target from 760p to 785p because it reckons the shares look cheap. It continues to rate Reed Elsevier at equalweight with a 605p target.
Aero-engineer Senior dropped 7p to 92¼p after Citigroup downgraded the shares from buy to sell, cut its target from 125p to 90p and urged clients to take profits, prompted by news of further delays to deliveries of Boeing's new 787 airliners. The 787 project is Senior's largest single supply contract.
Speculators' favourite White Nile was up 1¼p at 49p. The miner, which had hoped to make its fortune in Sudan, has now signed a production sharing agreement with the Government of Ethiopia. White Nile must invest £3m in seismic operations, due to start later this year, and a minimum £4m on drilling operations.
Kent-based car dealer Caffyns skidded 60p to 845p after a profits warning.
TOMORROW'S AGENDA
• The trading update season continues with a swathe of retailers revealing how they have fared over Christmas. Analysts fear that Primark and grocery brands owner Associated British Foods will disappoint investors as the soaring cost of ingredients hits its food divisions. Meanwhile, Home Retail Group, the company behind Argos and Homebase, could see a drop-off in trading at both chains. But entertainment group HMV is expected to see a recovery in sales after slashing prices.
• Peroni brewer SABMiller, which last month agreed to merge its US operations with rival Coors, also reports. Tough times are forecast for the sector this year, with high input costs remaining a major worry.
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