Market round-up: Bailout rollercoaster

By Philip Scott
Updated:

 

The week kicked off to a grim start as the FTSE 100 dropped back below the 5000 mark following the nationalisation of beleaguered buy to let specialist B&B.

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The index plunged as banks took a beating following the B&B nationalisation.

After a day of heavy falls for banks, the index closed down 269.7 points at 4818.8.

Over the trading week, the index of the UK's largest firms shed 9% to close at 4980.25.

On Monday, the eyes of the City were on Halifax Bank of Scotland as the share price of Britain's largest mortgage lender lightened by a further 31.30p to 142p, substantially below the rights issue price of 275p and the all-share terms from Lloyds TSB.

City analysts in general however have acknowledged the Lloyds TSB has still got the bank at a decent price, equivalent to 182p a share.

But others have voiced concerns that the enlarged group could quickly find itself short of cash.

One broker anticipated that the shortfall could be up to £10bn, unless conditions in the money markets improve significantly. Some have prompted rumours that the deal could even be abandoned.

Over the week the two banks are however the biggest risers in the top 100 with Lloyds up 16% to 290¼p and HBOS up 19% at 200½p.

On Tuesday, the rejection of the US Treasury's $700bn bailout plan for the banks threw financial markets into turmoil. Indeed the financials bore the brunt of much of the sell-off among blue-chips over the week.

Shares of Royal Bank of Scotland fell 10% to 186.2p, suffering from the rescue at Fortis, with which it joined up to bid for Dutch bank ABN AMRO. Barclays edged ahead by a mere 0.41% to 368p. Insurers suffered too with Legal & General down 9% to 96.8p, Prudential lost 8% to close at 498p while both Friends Provident shed 13% to 83.4 and Aviva lost 8% to close at 478p. HSBC however firmed by 6% to 927¾p.

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Shares in AIM listed group New Star Asset Management are now worth 59¾p, representing a punitive drop of 19% over the week. At their peak, last year, they were worth 481p. One group Arden Partners stated that if the Footsie drops to 4000, NSAM could probably be in rights issue territory.

It was another testing week for resources and commodities stocks. Xstrata, down 12% to 1680p, dropped its 3300p-a-share offer for rival Lonmin, which as a result endured a harsh 31% drop to close at 1701p. Meanwhile, BHP Billiton fell 13% to 1187p despite the Australian authorities giving the green light to its proposed acquisition of Rio Tinto, also down, by 8% to 3398p.

Anglo American lost 10% to finish the week at 1781p, after Goldman Sachs added the shares to its Pan-European buy list and Vedanta Resources lost 21% over the trading week at 1019p after Goldman added the shares to its Conviction Sell list. Kazakhmys lightened by 14% to close at 569p, Cairn Energy shed 18% to finish at 1854p and Eurasian Natural Resources lost 1% to close at 494¾p.

But the biggest hit in the FTSE 100 was Harmony Gold Mining Company, over the week its share price collapsed by a massive 90% to 466½p. In South Africa this week three miners were killed at AngloGold Ashanti, Anglo Platinum and Harmony Gold mines according to the National Union of Mineworkers.

On Thursday, the reviewed US bank bailout was voted through by the Senate but must go back to Congress for approval. The FTSE 100 index touched 5052, but closed nursing a fall of 89.25 at 4870.34 after Wall Street kicked-in with a fall of 214.8 at 10,616.3 this afternoon.

Half-year numbers from Marks & Spencer, up 8% over the week at 239½p, got the thumbs-up from the City. Dealers said the shares had been a bad performer of late, having dropped from the 300p level since August. The rise also spilled over into fashion rival Next, which was up 5% at 1135p.

Morrison lifted by 9% to 269p. Rival Tesco, rose 12% to close at 415.7p having announced an 11.3% rise in half-year profits to £1.4bn, with sales up 14% to £28.1bn. The supermarket group's UK like-for-like sales climbed 6.7% in the 26 weeks to August 23, or 3.7% excluding petrol.

Oil shares failed to benefit from a higher oil price, which nudged back above $100 a barrel during the week. BP and Shell each lost 4% to close at 467¾p and 1628p respectively. But yesterday excitement gained momentum following a media report that Shell had written to Regal chairman Keith Henry within the past few days.

It is rumoured the letter sketched out a proposal for a takeover worth 300p a share. But a Regal spokesman said the story was not true. The situation did Regal no harm which enjoyed a 28% rise over the week to close at 125p.

Next week sees finals arrive from EpiStem Holdings, Tristel and Waterman group on Monday with interims from Bezant Resources and THB Group following on Wednesday and Friday respectively.

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