Stock market report: Monday close
There are still pockets of interest for stock-market investors despite the gloom surrounding the banking sector at present.
Hopes: Shares are expected to start higher
Renewed bid hopes boosted shares of bombed-out mining giant Rio Tinto amid whispers that one of its biggest shareholders may take advantage of the recent collapse in the share price to snap up the rest of the company.
The shares rose 210p to 1517p, after touching 1606p, but fell again 18p to 1489p and remain well below the record 7078p struck after last year's bid approach from big rival BhP Billiton.
It was during this period that stateowned Aluminium Corporation of China (Chinalco) paid more than £7bn to acquire a 12% stake. That was equal to 6000p a share. But rio has since gone into freefall following BhP Billiton's decision to walk away from making a bid, and the slump in rawmaterial prices that has reflected a slowdown in China's economy.
Chinalco is estimated to be sitting on a paper loss of £5.3bn relating to its initial investment. The speculation intensified after Chinalco reported a 50% drop in profits last year because of low aluminium and copper prices.
National Express accelerated 0.25p to 420p on talk of a break-up bid. Spanish non-executive director Jorge Cosmen has been adding to his holding recently following the departure last month of chairman David ross. Earlier this month, he bought 190,000 shares at 503½p, each for a total of £956,000. That stretches Cosmen's holding to almost 30m shares, or 19% of the bus and train operator.
Shares generally slammed into reverse after an early mark-up. The FTSE 100 index dropped 38.5 to 4108.4, having touched 4251.9. Wall Street is closed for Martin Luther King Day ahead of the inauguration of President-elect Barack Obama.
It was inevitable early attention would focus on the banks and Government attempts to launch a second multi-billion-pound rescue package designed to free up much-needed funds. But anyone pinning hopes on a dramatic change of fortune in their badly deflated share prices was quickly disillusioned. Most banking analysts see the Government's latest move as high-risk at best. And who wants to buy shares in a company likely to be nationalised?
Royal Bank of Scotland slumped 23.10p, or nearly 67%, to a record low of 11.60p on turnover of 500m shares, with the Government set to increase its stake from 58% to 70%. The ban on short-selling ended on Friday, leaving the likes of RBS vulnerable to bears.
It was the first day of trading for the newly merged H
Even Barclays saw its rally run out of steam. The shares suffered a big sell-off late on Friday. They initially touched 123p, before rattling all the way back to trade 10p lower at 88p as more than 200m shares changed hands.
The bank, which has remained outside the 'golden circle' that accepted Treasury funding, argues it will report pre-tax profits of at least £5bn. Speculators remain convinced it will have to seek further funds. In the past, it has turned to Middle and Far East sovereign wealth funds.
Even the once-mighty HSBC, which sparked off the credit crunch with big write-offs back in February 2007, came under selling pressure. The price dropped 34¾p to 501p after institutional investors began selling stock on Friday, amid claims the bank may have to turn to shareholders in order to seek fresh funding at around 300p.
Morgan Stanley warned last week that HSBC needed to raise up to £20bn. Goldman Sachs has also flagged further weakness in the shares.
Centrica stood out with a rise of 11½p at 274½p after Société Générale lifted its rating from sell to hold and its target from 235p to 264p.
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Tomorrow's agenda
Pubs group JD Wetherspoon hit the headlines earlier this month with its offer of 99p pints and £2.99 meals, sparking talk of a looming price war. With its cheap booze and grub, Wetherspoon has so far fared better than most of its rivals, as the industry struggles with the double whammy of the smoking ban and the recent drop-off in consumer spending. Investors will be hoping founder and chairman Tim Martin has more good news for them when he updates the market on trading.
Burberry, the fashion house famed for its trademark check print, reports third-quarter figures. The luxury sector has been suffering as even the wealthiest feel the pinch and analysts at JPMorgan are not expecting Burberry to be spared, forecasting a 7% drop in like-for-like retail sales.
Comet owner Kesa issues a trading statement covering the Christmas period. It is likely to be a grim reminder of the High Street's pain as shoppers stop splashing out on big-ticket goods.
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