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Stock market report: Friday close

By Rosamund Urwin
Updated: 12:42 EDT, 12 December 2008

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Shares tanked in London today after the bailout of the 'big three' US car giants stalled and as banking stocks dived.

Nervous: Shares are expected to head lower

The FTSE 100 plunged 2.5%, or 108.34 points, to 4,280.3, giving back much of the hard-earned gains of recent days and wiping around £30bn off the value of top stocks.

The benchmark index had been down by over 185 points mid-morning after talks to win bipartisan support in the Senate for the automakers' rescue plan collapsed. But shares recovered slightly as the US Treasury effectively said it would not allow the carmakers to fail.

HBOS's dire update on trading meant banking stocks were the worst hit, making them four of the five biggest fallers on the Footsie. HBOS claimed the wooden spoon, down more than a fifth, or 20.1p, at 67½p. Meanwhile, Royal Bank of Scotland was 10p cheaper at 56.1p, leaving the UK taxpayer over £2bn out of pocket, Lloyds TSB was off 28.1p at 129.90p and Barclays dropped 13.1p to 148p.

Even HSBC was suffering after Dresdner Kleinwort said it expects the banking giant to cut its dividend in 2009, and warned that earnings per share will fall by a fifth. Its shares lost 17p to 733p.

In New York tonight, the Dow Jones plunged 14.50 points to 8550.59. But this was a much smaller sell-off than analysts had expected despite swathes of gloomy, albeit all-too-predictable, data out of the States. Investors were left chewing over the repercussions of news that the White House is considering diverting money from the Wall Street rescue fund to stave off bankruptcy filings among the automakers.

Could the banks blow the whistle on JJB Sports? Citigroup analyst Ben Spruntulis set a target price of just a penny for the sportswear chain's shares and said the debt-laden group's fate appears to lie in the hands of lenders.

With trading deteriorating rapidly, Citi warns that chief executive Chris Ronnie will need to sell off more than just the health club division if the company is to meet its obligations to suppliers. In a note titled 'They think it's all over', Citi predicts the retailer will stay in the red for at least the next three years, reporting losses before tax of £17m in January 2009. Traders have been saying for weeks that JJB is a prime candidate to join Woolworths on the High Street scrapheap. Today its shares closed at 1.22p.

Doorstep lender Cattles was the biggest mid-cap loser, off 7p to 23p, a record low. Broker Numis Securities has suspended coverage of its shares, saying they are either worth 200p or nothing. It all hinges on whether the company, which lends to subprime customers turned away by High Street banks, gets its much-desired banking licence allowing it to take retail deposits.

Meanwhile Citigroup has slashed its price target for Cattles from 110p to 36p. The City big gun has given a hold rating on the shares but says it will be reviewing its position after next week's trading statement. Estate agency chain Connells offloaded its 17% stake in online rival Rightmove, putting the 21m shares up for auction at 155p a pop. The move reflects the dire straits the property market is in, with both companies hard hit by the downturn.

Rightmove's shares, changing hands for around 450p just a year ago, plunged another 20¾p to 163¼p. But WH Ireland has raised its rating from underperform to market perform, saying the biggest natural seller of the stock has now gone and this could mark the end of the shares' descent.

Homebase and Argos owner Home Retail Group this week won promotion to the FTSE 100 at the quarterly reshuffle, but analysts at ING have warned it will be tough at the top. The broker is advising clients to dump the stock and has trimmed its price target by 15p to 200p. ING has also reduced profits forecasts for 2010 by 12%, saying the strength of the dollar has not been factored in to earnings expectations and increased price-cutting will eat into profits. The negative broker sentiment sent its shares sinking 1½p to 216p.

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Monday's agenda

How the capital's High Street stores are faring in the crucial pre-Christmas period will be revealed with the release of retail sales for November. Last month, the British Retail Consortium reported that sales in October sank 1.8% on a year earlier, the worst set of figures since summer 2005, but still a better performance than was seen across the nation. November's statistics will be the first set to show the full impact of the opening of the Westfield shopping centre in Shepherd's Bush, which lies just outside the survey's area, on sales in central London's shops.

December's house price index from Rightmove will confirm last month's findings: that sellers have finally twigged that the housing market is in dire straits, and have slashed asking prices for their properties accordingly. In November, the online estate agency reported that prices had dropped 2.9% on the previous month and were down 7.1% on a year earlier.

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