Yesterday’s trading: Rate cut is just a big yawn
Big deal! Any idea that dealers would be grateful for small mercies and respond favourably to a paltry quarter point cut in interest rates to 5.25% was lost in a hail of selling orders.
Geoff Foster, Daily Mail.
Coinciding with the midday announcement of acutely disappointing results from drugs giant GlaxoSmithKline (89p lower at 1078p), an early 40 point Footsie fall was soon extended to a worrying 166.6 point deficit before wacky Wall Street had a chance to open. The close was a painful 151.3 points lower at 5,724.1, taking the fall since the start of the year to 732.8 points, or 11.3%.
Rumours had been doing the rounds that Mervyn King and his pals at the Bank of England would take a leaf out of the Federal Reserve's book and slash UK rates by ½% to help restore confidence during the credit crunch.
The Fed has already this year reduced US rates by one-and-a-quarter points to 3% to try and stave off recession.
But no, King & Co fell well short again and even tamely hinted that the Bank would not be aggressive because of fears over rising inflation. Yawn!
David Brown, chief European economist at Bear Stearns offered some solace: 'The Bank of England has ended up well behind the curve on easing and its concerns about inflation risks are entirely to blame. The door remains wide open for deeper cuts this year and our year-end target for UK rates in now aiming for 4%.'
Heads were already down after a revenue warning from directories group Yell saw the shares plummet 50¼p to 279¾p. BT lost 25¾p to 237p after missing third-quarter revenue targets because of intense broadband competition and a big drop in quiz show phone-ins.
Nervous selling ahead of the results on February 20 left mortgage bank Alliance & Leicester 65p down at 588p.
Reflecting their exposure to depressed equity markets, Prudential fell 33p to 591p and Standard Life 10¾p to 203p. Old Mutual cheapened 5.4p to 121.1p.
Mobile phone retailer Carphone Warehouse resisted the malaise, buzzing up to 313¾p before closing 3½p better at 309¼p. Rumours of a bid from Best Buy of the US have recently been rife, but dealers were excited by another interesting jackanory. A managament buy-out at around £4 a share could be on the cards. Founders and major shareholders Charles Dunstone and David Ross are said to want to sell all, or part, of their substantial shareholdings before the change in capital gains tax in April.
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Miner Xstrata rallied from 82p to 15p lower at 3820p after nosy buyers loaded up with stock on revived talk of a £46 a share cash offer from Brazilian miner Vale.
More than 27m Aegis shares hanged hands after Campaign, the advertising industry's 'bible', suggested that Vincent Bollore, 29% shareholder and chairman of rival firm Havas, is poised to launch a bid for the London-based media company. The close was 6½p higher at 116p.
It was eyes down for a full house at casino, bingo and online betting company Rank (5p up at 95¾p) as takeover speculation intensified. Malaysian gaming investor Genting, which already owns Stanley Leisure, has increased its stake to 11% from 10%. That follows hard on the heels of news that Guoco, the Asian-based investment group run by Quek Leng Chan, had lifted its stake by 1% to 6.05%.
Betting shop group Ladbrokes pulled up lame at 289½p, down 1½p, after acquiring Eastwood Bookmakers, Northern Ireland's largest bookies, for £117.5m. Broker Numis gave the thumbs up and said the deal will be 1% earnings enhancing in 2008 and in 2009.
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Racecourse owner Arena Leisure edged up ½p to 45½p. Altium Securities said the Government's decision to shelve plans for a supercasino in Manchester is very good news for Arena. Last September the company secured planning permission for significant improvements to Wolverhampton racecourse. The plans include the incorporation of a 1,000 sq metre casino within the racecourse, creating the UK's first 'racino'.
Cash-rich Telecom Plus, supplier of a wide range of utility services to both residential and business customers, jumped 18¾p to 223½p on a bullish trading update.
Performance is currently well ahead of expectations and the board expects pre-tax profits for the year to end-March to exceed £16.5m.
An upbeat trading update helped life sciences products and laboratory services company Celsis International rise 9p to 181½p. Positive interim results have been followed by strong trading into the second-half of the year.
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