Yesterday's trading: Shares slide as trading freezes

By Rupert Steiner for the Daily Mail
Updated:

 

The Footsie followed the debt markets into the deep freeze yesterday as wintry weather swept through the country preventing many traders from coming to work.

City of London with snow

Trading freeze: Yesterday's snow sent a shiver through the banking sector

The usual level of dealings tumbled with volumes cut in half to around 926m on the index of top firms, down 71.86 points to 4077.78.

The blanket of white stuff also sent a shiver through the banking sector. Last week's gains were brought to an abrupt halt by traders taking profits.

Barclays had led the banking rally reverberating from what many saw as unsustainable lows.

It had posted an upbeat letter reassuring the markets ahead of its results.

But the sentiment did not cut much sway with the credit rating agencies yesterday. Moody's warned of increased risk for Barclays investors.

It cut its long-term ratings on the bank by two notches to Aa3 sending Barclays tumbling 10% or 11.2p to 94.9p. Moody's warned rising unemployment and credit-related write-downs could lead to 'significant' further losses.

The sector was also depressed by various economic luminaries pouring cold water on the so-called 'bad bank' idea. It was one of the options mooted to cure the ills of the financial sector.

Market expert David Buik says the initiative, where a bank would be created to take on the bad debts of the others, seems to have gone down like a lead balloon.

'There is huge adverse reaction to the ' bailout' from various economic experts around the world,' he said. 'Many believe that if the "Bad Bank" buys these toxic assets at a sensible premium, and that the taxpayer could be on the end of a hiding to nothing.

'That is possibly true but there is no plausible alternative and given time many of these

toxic assets will be extremely valuable. The likes of the ebullient and arrogant George Soros, Jim Rogers and the more measured Joseph Stiglitz bring considerable influence to bear. This negative chat is certainly affecting business morale across the spectrum and a recovery in 2010 seems like a dream rather than a realistic possibility.'

The gloom dragged down the rest of the sector. Royal Bank of Scotland fell 1.6p to 20.4p, and Lloyds Banking Group shed 2.5p to 88.6p. Europe's biggest bank, HSBC, fell 16¼p to 514p and Standard Chartered closed down 46p to 830p. The banks scraped the bottom of the fallers with the miners. Lower metals and energy prices piled on the pressure as order books from the world's manufacturers continued to shrink.

The world's biggest miner, BHP Billiton, fell 22p to 1154p, followed by Anglo American, down 26p to 1240p. Anglo-Swiss giant Xstrata was also down 41/2p to 565p.

But much of the fall was a hangover from its rights issue announced last week. Xstrata has managed to irritate many of its shareholders by offering preferential treatment in the rights issue to its biggest shareholder Glencore.

City coverage and share tips

This is Money carries breaking City news throughout the day. Bookmark Companies & Markets and try these markets links...

Newspaper graphic and pen

Bucking the sector was Rio Tinto, up 100p to 1580p.

The shares soared 6.64% as it confirmed it had bowed to pressure to seek a deal with its biggest shareholder for more cash. It said it was in talks with Chinalco, its largest shareholder, which may buy convertible debt in Rio or direct stakes in some of its businesses.

Rio is trying to pay down its crippling debt pile as demand for its metals has shrunk.

Elsewhere, the insurers took a hit after Bank of America downgraded Europe's insurance sector to 'neutral' from 'overweight' over fears of possible dividend cuts and funding shortfalls-from weakening earnings. The Pru fell 17¼p to 316¼p, and Aviva, which is shedding its Norwich Union brand, was down 4½p to 307½p.

Further fears over the debt mountain at plumbing and building materials group Wolseley sent the shares tumbling 6.6% or 11.4p to 161.3p while interdealer broker ICAP fell 16½p to 219½p after it signalled its interest in bidding for clearing house LCH Clearnet.

In the small caps shares in biotech ImmuPharma, recently tipped in the Daily Mail, rose 3p to 1080p. Last week it posted positive results on clinical trials for its lead drug Lupuzor, a potential treatment for the auto-immune disease Lupus.

Yesterday American biotech giant Cephalon said it would exercise its option to licence the worldwide rights to Lupuzor.

ImmuPharma will receive $30m, the second down-payment on a $500m deal the companies have signed. This is a strong signal that Cephalon thinks Lupuzor will be a success.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Most watched Money videos