Market report: Tuesday close
Shares of British Airways today tumbled a further 16.8p to 128.2p - their lowest since the post 9/11 aviation slump of March 2003.
Worried: Another nervous day ahead
The carrier's market tag is now just £1.53bn, half the sum of this year's estimated fuel bill for the UK's national carrier.
BA continues to lose customers in a highly competitive market as it struggles vainly to keep surging costs - fuelled by higher oil prices - under control. By contrast, its main rivals in Europe, such as Aer Lingus and no frills airlines easyJet, down 10¾p at 294¼p, and Ryanair, off four cents at €2.06, have recently reported increased passenger numbers.
Today's fall in BA shares was accompanied by a savage profits downgrade from US broker Citigroup. It has increased its operating loss figure for the year to 31 March 2009 to £108m from £93m. That compares with a profit last year of £875m.
Citigroup also forecasts operating profits during BA's traditionally strong summer quarter will drop by 80% to £57m the comparable quarter of 2007. Citigroup still rates the shares a buy with a high risk qualification, and warns shareholders they will have to contend with further pain.
There are only so many times a dead cat can bounce, but even so investors were striving to make the most of the situation as they set about clawing back, or taking advantage of, yesterday's stock-market collapse. But the FTSE 100 index only registered a modest gain, closing up 16 points at 4605.2.
Market principals remained reluctant to trade with certain counterparties. Some of them are subsidiaries of Icelandic banks, which remain suspended on the Nordic exchange. Shares quickly ran out of steam on Wall Street this afternoon, the Dow paring back its gain to 21.3 points at 9976.8.
Banks ran into another wave of selling after demanding action from the Chancellor of the exchequer. Royal Bank of Scotland tumbled 58.1p to a record low of 90p. Word is an all share takeover of RBS by HSBC has been lined up. HBOS fell 61.3 to 99½p and suitor Lloyds TSB lost 33½p at 225½p.
The thin trading conditions were reflected in BG Group, which rose 38p to 865p. The shares were at 1175p just three weeks ago.
Struggling broadcaster ITV slumped 4p to a record low of 35p, with one of the City's big-hitters forecasting the shares may still have some way to fall. UBS has repeated its sell rating, and lowered its 12-month price target yet again, from 28p to 25p, claiming the shares are trading at a 40% premium to those of rivals.
The broker is worried about ITV's reliance on a rapidly declining UK economy. It said: 'Stripping out the content business, the remainder is trading on 56 times 2009 earnings, more than pricing in an uncertain recovery and regulatory benefits.
'While ITV is one of the most geared stocks in the market, both operationally and to the economy, it has been supported by bid hopes. In our view, bid hopes are misplaced until the share price catches up with the economic reality.'
The broker warns that the decline in advertising revenue is set to grow from 8.9% to 13.1% next year. Other brokers have also pointed out that while BSkyB, down 4p at 404¾p, has been instructed to reduce its stake in ITV from almost 18% to less than 7%, those shares may overhang the market for some time to come.
Property investor Wichford's shares lost 12½p at 50p, reflecting its involvement with failed US bank Lehman Brothers. Lehman initially provided Wichford with loans totalling £344m, which were later transferred to three securitisation companies, funded by bonds listed on the Dublin Stock exchange.
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Tomorrow's agenda
Supermarkets chain J Sainsbury is tipped to report robust second-quarter sales growth of between 3.5% and 4% excluding fuel, but the city will be searching for signs the group is losing market share. Analysts have warned it is in danger of losing customers as cash-strapped middle-class shoppers defect to discounters such as Aldi and Lidl. Hopes the Qataris could return with a fresh bid have recently given a fillip to the grocer's shares, but citigroup has said it would be surprised if an offer materialises in the near future.
As Bank of England policymakers meet to set interest rates, with a decision announced at noon on Thursday, Nationwide's survey on consumer confidence will contribute to the case for a cut. The building society last month reported a slight improvement in consumers' expectations for the UK economy, but the deepening global financial crisis will have fed pessimism.
How the world reacted to the crisis (click to enlarge)
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