Market round-up: Cut leaves Footsie cold

By Philip Scott
Updated:

 

Weekly stock market report: The full percentage point slashed off the bank rate did little to stimulate trading, as the FTSE failed to get a rate cut boost. Investing correspondent Philip Scott rounds up the stock market week.

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Stock watch: Our round-up of the week's trading

Investors responded with indifference to the 2% bank rate - the joint lowest on record - despite the City clamouring for a rate cut.

Overall, on Thursday, less than two billion shares swapped hands and the FTSE 100 closed 1.2 lower at 4168.7.

Over the week the index of the UK's largest firms shed 6% to close yesterday at 4049.37.

The last time interest rates were at 2% was in 1951 – the rate has never been lower since the Bank was established in 1694.

The obvious winner as a result of the interest rate cut was house building firms.

Cheaper money, coupled with a move by the banks to pass on interest rate cuts in full to mortgage holders, not to mention Gordon Brown's pledge to help those who fall behind with their repayments, should help to boost some confidence in the embattled housing market.

Over the past year, house prices have dropped 16%, according to the Halifax house price index, but some the UK's biggest builders have endured much sharper falls, having been forced, in many cases, to write off the values of their land banks and portfolios of empty homes.

All the main players managed gains on the day of the interest rate announcement but over the week fortunes were more mixed.

Barratt Developments firmed 10% to 50¾p, Bovis Homes, climbed 9% to 341p and Bellway closed at 520½p, up 2% over the trading week.

Persimmon and Taylor Wimpey however dropped by 8% to 199p and 10% to 9.9p respectively.

Property companies are also looking to benefit from cheaper money. Commercial property was one of the earliest casualties of the banking crisis and those hoping that the market may have reached the bottom include Land Securities, down 5% at 901p, and British Land, 4% lower at 502p.

On Friday financial shares enjoyed some support and over the week the strongest riser on the top 100 was Royal Bank Scotland, up 14% to 63p, HSBC, dropped 1% to 710p, Halifax Bank of Scotland fell 5% to 86.7p, Lloyds TSB dropped 11% to 150p and Barclays shed by 18% to 138.3p.

Life insurer Legal & General firmed 10% to 74p while Schroders lightened 12% to 746p and Old Mutual, one of the worst performers in the FTSE 100 over the week fell back by 21% to 43.1p.

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City investors started the week badly following the collapse of London Scottish Bank and New Star's Asset Management's crisis talks with its creditors. The latter was declined a trading suspension on Monday when its share price fell to an all-time low.

On Wednesday, it was announced that the beleaguered group had thrashed out a deal that would see the group de-list from the stock market and that a syndicate of banks, including Lloyds TSB, HBOS, HSBC, Royal Bank of Scotland and National Australia Bank, would take a 75% stake in the firm, as part of a major re-structuring.

All in all, over the week the group's share price fell by a massive 87%, to close on Friday at 1.81p – representing a fall of more than 99% during the past 12 months.

The miners, once again, had a harsh week of selling amid worries on commodity prices. Investment giant, Goldman Sachs said the outlook for 2009 appears increasingly difficult for the sector and downgraded its coverage from attractive to neutral. Xstrata, dropped the hardest within the big 100 over the week, down a massive 38% at 575p, Rio Tinto fell 35% to 1049p and BHP Billiton closed 18% lighter over the week at 975½p.

With increases in rail fares way above the rate of inflation, the rail travel boom may be over. Results from Stagecoach earlier this week, suggested as much with train operators looking like they will have to ride out the impact of rising unemployment and deteriorating economic conditions.

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Morgan Stanley warns the next six months will be difficult for the big operators, with all of them likely to be hit by downgradings of broker earnings estimates.

The US broker has downgraded Arriva, 20% lower at 510p, and Stagecoach, down 32% to 119.3p, from equalweight to underweight. FirstGroup, was amongst the hardest hit over the week among the FTSE 100, down 22% at 367½p, while National Express fell 15% to 478½p.

The trading update from Tesco was welcomed, with the shares moving up by 10% over the week to close at 324.9p, after having recently traded at four-year lows. Another strong riser over the week was GlaxoSmithKline which put on 7% to close at 1194p.

Next week sees finals arrive from industrial group Hardide and engineer Pressure Technologies on Monday followed by Domino Printing on Tuesday and RWS Holdings on Thursday. In addition, Gourmet Burger Kitchen owner Clapham House delivers its interim report on Wednesday. The company seems to have recovered from its profits warning a year ago, with first-half figures forecast to be solid.

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