Yesterday's Trading: Panic hits over Wall St pain
Mortgage giants Fannie Mae and Freddie Mac may have been bailed out by the US government, but what's going to happen to Lehman Bros?
Geoff Foster: Yesterday's market report
That was the multi-million dollar question being asked by neurotic dealers on both sides of the Atlantic as shares of the struggling Wall Street investment bank crashed 33% to around $10 in early trading in New York.
Panic selling followed worries about the bank's ability to sell its asset management business and raise desperately needed capital after it revealed talks with Korea Development Bank had ended.
Those concerns cast a dark cloud over Wall Street and the Dow Jones lost an initial 66 points gain to trade 134 points lower. That upset the applecart in London.
Hours earlier dealers heaved a huge sigh of relief when they found it was business as usual after Monday's incredible seven-hour LSE computer failure.
A detailed explanation about what had effectively caused the total shut down was still not forthcoming, though shares of the London Stock Exchange recovered an initial 17p loss to trade 18p higher. The close was 4½p dearer at 804½p.
The Footsie climbed a further 78.5 points before elevenses on continuing hopes the Fannie and Freddie rescue could be a turning point. However, profits were quickly trousered when Lehman's precarious financial position returned to prominence and the index traded 59 lower before closing 30.7 points off at 5,415.6. The FTSE 250 shed 131.8 points to 9,138.2.
The oil price dipped to around $101 a barrel, its lowest for five months ahead of an OPEC meeting at which the cartel was expected to leave its output ceiling unchanged. Airline stocks took off. The prospect of lower fuel costs saw British Airways fly 10¼p higher to 263¼p and discount operator easyJet 26¾p to 375½p. Cruise ship giant Carnival steamed 81p ahead to 2099p and tour operator TUI Travel added 6¾p to 230p for the same reason.
Tullow Oil declined 43p to 730p despite announcing an oil discovery with the Kigogole-1 exploration well in the Butiaba region of Block 2, Uganda. Broker Fox Davies Capital said the latest success underlines the potential of the reservoir and region and may serve to de-risk prospects in adjacent blocks.
Barclays Bank, up 10¾p at 365¾p, reflected hopes that the worst of the credit crunch is over.
Miners were dragged lower by weaker gold and metal prices. Kazakhmys fell 92½p to 904½p, Eurasian Natural Resources 72½p to 762p and Xstrata 206p to 2358p.
Staring relegation from the Footsie in the face, pubs group Enterprise Inns lost 20¾p more to 265p. Punch Taverns, which plummeted last week after scrapping its dividend, remained flat as a pint of homemade scrumpy at 272¾p, down 11¼p.
Altium Securities advised clients to pull the plug on Game Group on fears of an escalating computer games price war after supermarket chain Morrison's this week commenced a one week offer selling chart games with up to 50% off the recommended retail price. They ran for the exit and the shares dropped 16p to 244p.
AIM-listed Ffastfill edged up 0.1p to 8.125p after announcing a new application service provider contract with ICAP (6p better at 486p), delivering live connectivity to the London Metal Exchange.
Nationwide Accident Repair Services, the UK's largest provider of crash repair services, accelerated 3p to 133½p after reporting a 14% rise in half-year pre-tax profits to £3.9m on sales of £88.3m.
Equity Special Situations jumped 15p to 265p after increasing its stake in AIM-listed Isle of Man private bank, Conister Financial Group, chaired by financier Jim Mellon, to 19.99%. The effective share swap between the two businesses sees CFG also increasing its shareholding to 18.6% in ESS.
Messaging services company Coms rose 2½p to 31½p after launching a combined VoIP and broadband telephony service, which provides substantial cost savings and guaranteed consistent high quality whilst eliminating the need for a BT landline.
Lloyd's vehicle Omega Insurance advanced 4½p to 153p on a Shore Capital recommendation in the wake of better-than-expected interim underwriting results. Craneware, a leading provider of performance improvement software for US healthcare organisations, put on 13½p to 221½p after impressive preliminary results.
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