Market report: Tuesday close
The FTSE 100 index tumbled 146 points tonight as trading screens on both sides of the Atlantic flashed red.
Movers: Latest from the stock exchange
A blizzard of dismal news on the British economy sent investors running for cover, with the blue-chip index at one stage down the best part of 160 points. It was off 139 at 5486.9 in late trading as New York's Dow Jones Industrial Average settled down 68 at 11,282, having shed 100 points in the opening minutes.
The banking sector was hammered in London with shares in HBOS back below 275p - the offer price for its vital £4bn rights issue. The shares, down 7p at 269p, were joined on the slide by Royal Bank of Scotland, off 11p at 204p, Barclays, 10p adrift at 281½p, HSBC, 21¼p lower at 754½p, and Lloyds TSB, which lost 9¾p to 301p.
The sell-off came as recession fears were fuelled by the rising cost of oil, falling house prices, and declining activity in British factories. Analysts warned that a sharp deterioration in the economy will lead to a rise in customers defaulting on loans and hit banks' earnings. Rumours of further writedowns at UBS and a profits warning at Deutsche Bank added to the gloom.
HBOS is looking to raise £4bn to shore up its balance sheet. When the rights issue was launched, the 275p offer price represented a 45% discount. The stock has since plummeted under pressure from short-sellers and the 'discounted' rights issue now looks anything but.
There are growing fears in the City that HBOS's army of small shareholders will not take up their rights, leaving the underwriters holding a large rump of stock. The 2.1m private shareholders can sell their nil-paid rights without incurring dealing charges through the lender's share-dealing service. The nil-paids fell 4.2p to 6.55p.
Builders were also under pressure after building society Nationwide said house prices are falling at the fastest rate since the early Nineties. Taylor Wimpey, which will tomorrow detail plans to raise up to £500m from investors, fell 2p to 60p, Bovis was off 21½p to 318½p, Bellway 35¼p at 417¼p and Persimmon 24½p at 291½p.
Despite hopes it was about to strike a debt rescue deal with its banks, Barratt Developments still finished 1¼p down at 56¾p. The stock has lost about 95% of its value in little over a year but the refinancing deal, expected to be announced alongside a downbeat trading update next week, would be a major coup for Barratt.
'It would remove much uncertainty that has been surrounding the stock for quite some time,' said Rachel Waring of Panmure Gordon. 'It should be an opportunity to see the shares as being a bit cheap.'
Office interiors supplier Morgan Sindall, down 162½p or 22% to 585½p, suffered its biggest fall for six years after it said results will be hurt by the slowing commercial and residential property markets.
Tanfield, which makes electric vehicles such as milk floats as well as work platforms for construction firms, crashed 26.22p to 5.53p after it warned sales will miss analysts' estimates.
Recruitment firms were feeling the pain, with Hays down 7¼p to a five-year low of 83¼p after a downgrade by UBS.
Care homes operator Southern Cross Healthcare was off another 35p, at 95p, having lost more than half its value yesterday after a profits warning and admission that it has asked its banks for more time to pay off a £46m loan.
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TOMORROW'S AGENDA
• The dire state of the UK property market will again be in the spotlight as housebuilder Taylor Wimpey updates the market on trading. Despite cost-cutting measures, analysts say falling sales and writedowns will have eaten into earnings. Meanwhile, an announcement of the placing of new shares is expected after the company confirmed yesterday it is in talks with investors over an emergency fundraising to bolster its balance sheet. Taylor Wimpey shares have been among the hardest hit by the sell-off in the sector, losing nearly threequarters of their value in three months.
• The Chartered Institute of Purchasing and Supply's survey on construction is expected to further fuel the gloom engulfing the industry. With demand for new housing sinking, the headline PMI figure is anticipated to plummet to a new record low, falling from last month's 43.9 to just 42.5. Any figure above 50 indicates expansion.
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