Bank of England paves way for Britain to cut interest rates before the US: Nothing to stop us going first, says governor Bailey
Cameron left red-faced again in Greensill fiasco: Shamed tycoon sues Government over alleged leak
Bailey pulls his punches on rates yet again, but the Bank needs to deliver on lowering borrowing costs soon: ALEX BRUMMER
Our mortgage valuation says the house we're buying is worth £40,000 less: What should we do and can we appeal?
Bank of England holds interest rates at 5.25% for sixth time in a row - what it means for YOUR mortgages and savings
Scottish Power says our energy meters are now too old - is this a ruse to force us to get a smart meter?
No saving this popular family car: Ford confirms it will cull another of its best-selling petrol models next year to focus on EVs despite demand slump
Are you a Wetherspoon lover or hater? LEE BOYCE and SIMON LAMBERT have very different opinions on the pub giant that's flying high...
MARKET REPORT: North Sea giant Harbour Energy closes in on £9bn deal to take over German rival's oil and gas assets
Takeover target Wood Group hit by slump in revenues as bidders circle the oil industry engineer
Vodafone told to set up a security committee to 'oversee sensitive work' as £15bn Three deal is given the green light
ITV hopes for summer advertising boom as it continues to reel from last year's Hollywood strikes
Spanish bank BBVA goes directly to shareholders as it steps up bid for TSB owner Sabadell
Watches of Switzerland buys Italy's Roberto Coin for £104m in bid to expand in the lucrative luxury jewellery market
CRANE ON THE CASE: Air Mauritius lost my luggage and ruined my holiday but its compensation offer is terrible - what can I do?
I want to invest £600 a year for my new baby, what is the best way to do it - and how much could it grow to?
Artificial grass can lead to increased flooding risk, major insurer warns - so should you ever get a plastic lawn?
Get 5.6% interest with this quirky 365-day notice savings account that beats the top one-year fixed rates
Spring property bounce is a damp squib: Estate agents says rising mortgage rates keep buyers at bay
Zoning out: Why London renters are swapping Clapham and Camden for Abbey Wood and Forest Gate
JLR offers £150 a month towards the cost of insuring new Range Rover models to encourage sales after theft concerns
Ford boss says it may restrict petrol models in the UK to hit EV sales targets and avoid crippling fines
Used car sales hit a five-year high as fresh supply of second-hand motors enter the market and prices drop
Scottish Widows gave me access to a stranger's £40,000 pension - so could they get at my six-figure pot?

Yesterday's trading: Bears slaver at summer sell-off

By Geoff Foster for MailOnline
Updated: 02:27 EDT, 19 June 2008

View
comments

Overweight bears licked their lips in anticipation of a possible summer sell-off after dealers were inundated with bad news.

Geoff Foster, Daily Mail

The Footsie retreated 126 points before closing 105 points off at 5,756.9 after the latest Merrill Lynch Fund Managers Survey revealed that global money managers are now more bearish about UK equities than they have been for 10 years.

They believe the prospect of stagflation, a period of slow economic growth and relatively high unemployment, is beginning to create a major headwind for equities.

The proportion of managers underweight in eurozone equities rose from 5% in May to 27% in June, while 38% are now underweight in UK equities.

Investors' attitude to UK assets is not helped by a widely held view that sterling is overvalued even after an 11% fall in sterling's trade-weighted index over the past year.

Royal Bank of Scotland's credit strategist Bob Janjuah also rocked the boat when private comments he made to clients about equity market prospects were leaked to the market.

Apparently, he expects to see violent moves in equity and credit markets this autumn as rampant inflation prevents central banks from encouraging growth. He says the Footsie is setting itself up for a mighty big fall.

Royal Bank of Scotland, 12p off at 229¼p, recently tapped the market for £12bn cash at 200p a share to repair its battered balance sheet, so to hear one of its leading strategists now forecast a major move south raised eyebrows.

Wall Street slumped 135 points in the early stages, further depressed by Goldman Sachs' gloomy forecast that US banks will need to raise an additional £32.5bn and the deterioration in mortgage and lending markets will not peak until early 2009. Hedge fund boss John Paulson yesterday added his halfpenny worth, warning US banks are only a third way through credit related write-downs. He expects write-down losses may reach $1.3 trillion, exceeding the International Monetary Fund's $945bn estimate.

Battered banks took it all on the chin. Barclays, in demand on Monday after confirming plans to raise up to £4bn via sovereign wealth funds, closed 14¼p down at 326¼p. Lloyds TSB lost 15p to 341¼p, HBOS 8p to 318¾p and HSBC 11¼p to 815p. International bank Standard Chartered declined 61p to 1550p.

Fund managers were friendless. Schroders slumped 40p to 853p and Legal & General 5.1p to 110.8p.

Broker UBS was left with egg on its face after client Cadogan Petroleum flopped on its market debut. Offered for sale at 230p a share raising £139m, shares of the Ukraine focused oil and gas exploration group, were heavily sold down to 190p before closing at 200p, a 13% discount. Cadogan's chief executive said the fall was down to 'market dynamics'. A fund manager said he thought the stock had just been overpriced.

Replacement knee specialist Smith & Nephew skipped 16½p higher to 595½p on a UBS recommendation.

Stock market information

null

Website DigitalLook.com tells us that 36% of the Footsie is now made up of commodity related companies, compared with 26% last year. Bulls are hopeful then that miners continue to prop it up as they have done since the credit crisis began last August. Still not giving up hope of an eventual bid from Brazil's Vale, Xstrata rose 18p to 4250p.

Caretech eased 8¾p to 426¾p after Brewin Dolphin slashed its 12-month price target to 592p from 620p to reflect the impact of a 7% hike in the group's tax rate to 28%. The broker easily placed £30m worth of stock to help finance the £15.3m acquisition of Valeo, a residential care homes business in Yorkshire.

Hartest Holdings, the specialist supplier of instrumentation and medical equipment, rose 7p to 54½p following a 133% leap in full year pre-tax profits to £884,000. Shareholders were paid a dividend of 1p and net debt has been cleared.

Industrial company RPC jumped 9p to 214p on hearing that the board is undergoing a strategic review in which it will 'consider all options' to enhance shareholder value. Dealers took the view that it is now 'in play' and its days of independence are numbered. Panmure Gordon's target price is 258p but word is any takeover bid would have to be priced north of £3 a share to stand any chance of success.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.