FTSE muted as UK recession confirmed

Confirmation that the UK is in recession and further strong falls across the banking and insurance sectors on fears of further writedowns and nasty financial skeletons lurking in balance sheets kept the FTSE 100 index very muted.

Barclays rounded off a dreadful week with another double digit decline as shares in the bank closed down 8p or 13.5% at 51.2p. Shares in Lloyds Banking Group, meanwhile, have halved over the week and closed flat at 49.3p.

Early declines on Wall Street as bellwether General Electric warned that 2009 is going to be very tough also weighed on sentiment with the FTSE 100 closing at 4052.47, up a mere 0.24 points.

Shares in J Sainsbury were a rare bright spot, up 2.25p at 302.75p after boss Justin King apparently gave a "remarkably upbeat" presentation to the sales desk at Cazenove. "King believes Sainsbury has the opportunity to do over the next decade 'what Tesco has done over the last ten'," the broker added in a note.

Across the wider market there was a slew of profit warnings as the recession bites across corporate Britain. Shares in Renishaw dropped more than 20% to close at 345p, down 93.2p, after the engineering firm announced half year profits down 7% and admitted that annual profits will fall "significantly" short of the City's forecasts because the recession has depressed demand.

The news was especially disappointing because some analysts had hoped that the weakness of the pound would lead to an increase in export orders for Renishaw, which makes highly technical measurement equipment.

Insurance group Chaucer Holdings lost 1p to 41p after admitting that it is looking to raise more cash by selling shares "in light of the improving underwriting outlook for the insurance sector and the company's capital requirements".

City traders said they could see the possible need to raise cash in order to strengthen the company's balance sheet but are not convinced that there are green shoots in the insurance market.

Blue chip insurers were all marked lower today on fears that the forthcoming round of results from the US majors will present some pretty gloomy reading and talk that Swiss Re is preparing some massive writedowns. Aviva closed down 19p at 264p with Prudential down 18p at 288.5p.

Elsewhere, Aim-listed Infonic had its shares suspended early in the morning session as the company's board tried to clarify its financial position. Infonic, formerly known as Corpora, sells information management software to clients including Thomson-Reuters, the Ministry of Defence - as part of the EDS-led ATLAS consortium which is working on a £7.1bn upgrade of the armed forces' IT systems - and DHL, which uses Infonic's kit to support the NHS' supply chain.

At the time of its interim results in September, Infonic's management had made positive noises about trading, pointing out that it had £25m worth of orders in the pipeline. Today, however the loss-making company admitted that "unfortunately some contracts, some of which are material, were not concluded before the year end and there is uncertainty as to the exact timing of their conclusion".

"Consequently results for the year ended 31 December 2008 will be significantly below market expectations."

In a further shock the company, which had debts of £4m at the half year stage against total facilities of £9.75m, said it has some credit facilities which are expiring or payable during the first quarter of this year. "Infonic is seeking discussions with debt providers and shareholders to provide short term finance," it said.

Finally, it looks like game over for Delling Group, whose shares were suspended at 0.3p last month after the group's finance director followed its chief executive out of the door. The company admitted that it has been unable to implement the planned restructuring of its Swedish business because it lacked the necessary funds and as a result "the board is considering the company's options and its viability as a going concern".