Market round-up: Insurers under the spotlight
Investors have seen another difficult week take its toll as the market dipped again. Investing correspondent Philip Scott reviews the stock market week.
Stock watch: Our round-up of the week's trading
Big risers over the week were once again thin on the ground – the FTSE 100, once again fell below the 4000 threshold, with a sell-off wiping billions off the index, which eventually closed 2.43% down at 3780.96.
The sell-off followed heavy falls in Wall Street, as a result of Republican politicians gearing up to block a taxpayer-funded bail-out of its giant car manufacturers, who face likely collapse with the loss of tens of thousands of jobs.
The life insurers came under the spotlight on Thursday, when the main players endured a hefty sell-off driven primarily by fear that they could be the next industry to go cap in hand to their shareholders.
There is concern among some factions that the insurers have heavy exposure to corporate bonds, especially in the case of large borrowers such as Ford Motor Credit and GMAC. However defaults have, at least so far, been relatively benign.
For its part, Legal & General, down 18.66% to 57.1p over the past week, has not seen a default prior to this year for some nine years.
Aviva, down 14.65% to 344¾p, has endured about £400m of defaults, generally linked to Lehman and AIG, and Prudential, off 15.52% at 245p, says it has £293m worth.
The chief issue is that a substantial increase in defaults could threaten cash flow and dividends, and possibly force companies into raising extra money.
Lloyds TSB shareholders voted overwhelmingly in favour of the government-sponsored takeover of Halifax Bank of Scotland, on Wednesday. Lloyds, however, clocked up one of the largest drops over the week, plummeting by 24.88% to 124.7p, while HBOS also took a hit to the tune of 15.26%, falling to 73.3p.
On Thursday, shareholders of the Royal Bank of Scotland, down 7.06% to 47.4p, voted through the bank's taxpayer-funded £20bn capital-raising.
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Standard Chartered shed 2.19% over the week to close at 759½p. Broker Dresdner Kleinwort cut its target from 2100p to 1300p, warning that the worldwide recession will lead to increased problems.
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Shoppers are out on the High Street in force, as retailers offer pre-Christmas bargains and figures for last month show that sales declined by just 0.1% - far better than the 0.5% that many analysts had expected. However, the run-up to Christmas is still anticipated to be difficult.
Marks & Spencer slid 7.16% to 204¼p, Debenhams fell 23.77% to 23¼p but Next fell slightly by 1.07% to 970½p. Halfords responded to positive first-half numbers with a modest rise of 0.11% over the trading week to 237p.
Two groups having an extremely bad week were PC World and Currys owner DSG International and Woolworths. The former group's shares have slumped to new lows, down a massive 34.18% over the week to 13p. Citigroup has slashed its full-year target price from 30p to 18p ahead of interim results next week that are unlikely to impress.
There are now serious fears that the heavily distressed group Woolworths may disappear from the British High Street for good. It witnessed its share price value collapse by 64.07% during the past trading week alone – 90.47% over the past 12 months.
The troubled retailer, has been approached by Hilco, a company that specialises in trying to turn around struggling businesses, and is due to celebrate its 100th anniversary of British trading next year. It is in talks to sell its 800 outlets for as little as £1.
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Broker Cazenove now fears that there is likely to be more earnings downgrades of oil companies to reflect lower oil prices and falling demand. Over the week BG Group, is down 6.86% at 787½p, BP is also 5.28% lighter at 462¼p and Shell is 12.54% lower at 1465p.
Resources and mining groups continued their streak of bad luck once again over the past week – making up some of the worst performers, with Xstrata down 30.87% to 655p, Eurasian Natural Resources, off 23.22% at 201¾p and Rio Tinto, 19.01% lighter at 2075p.
However, in stark contrast Chile-based mining group Antofagasta was the best performer within the top-100 firms, after closing 4.49% up at 354¾p. Others that ended the week up were Randgold Resources, 4.86% higher at 2073p and support services firm Serco, which firmed by 4.25% to 398¼p.
Aside from the Barclay's shareholders vote next week, all eyes will be on the Chancellor Alistair Darling, who's pre-Budget report is being delivered on Monday. In addition finals arrive from RM Group and Fountains on Monday followed by Imperial Tobacco and Intec Telecom (Tuesday) as well as TUI Travel and Brewin Dolphin on Thursday.
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