Stock market report: Thursday close
Harry Hedge fund and his mates have made a fortune selling the financial sector short today. Stock-market bears thrive on bad news and there is no shortage of it these days.
Market watchers: The Stock Exchange will have eyes on the Bank of England
Barclays slumped 20.8p to 65.5p amid claims that the real extent of write-offs by the bank could be double what it has, so far, owned up to.
Banking analyst Sandy Chen at Panmure Gordon has slashed his target for the shares to 40p. Chen, a big bear of the banking sector for some time, reckons the outlook for Barclays is worse than the City has been led to believe.
He warns that the structure of swap agreements limiting Barclays' credit losses 'could buckle', and reckons the bank will book £13bn of impairment charges this year and next. That is double the guidance provided by Barclays' management.
He is forecasting that Barclays will plunge into the red this year with losses of £5.3bn followed by a deficit of £4.1bn in 2010.
Meanwhile, the liquidators of Lehman Brothers have asked Barclays to reveal the whereabouts of an estimated $3.3bn (£2.3bn) earmarked for bonuses, which it received when it bought the North American assets of the bank last year for $1.5bn.
Other banks to come under the hammer included Lloyds Banking Group, down 7.4p at 40.3p, HSBC, off 23½p to 377½p, and Royal Bank of Scotland, 1.9p lower at 20.8p.
Life assurer Aviva could not have imagined when it unveiled full-year results today and promised to maintain the dividend that its shares would respond with a drop of almost 30%. They plunged 81p to a record low of 204p, dragging other life assurers with them.
Brokers such as Panmure Gordon and Cazenove were fairly upbeat about the numbers, but Deutsche Bank has cut its rating from buy to hold. City gossips say Aviva can't afford to maintain the dividend with the current balance sheet.
They whinge about creative accounting and say Aviva's numbers do not stand up to close scrutiny. The gossips may turn out to be wrong, but their assertions created havoc in the financial sector, pushing others sharply lower.
In fact, life assurers accounted for six of the 10 biggest fallers among blue-chips.
Prudential slumped 55¼p to 221p, Friends Provident 9½p to 60.7p, Legal & General 10.8p to 26.6p and Standard Life, 24.1p to 138½p.
But the life assurers were not the only ones targeted by the short-sellers. Shares generally tumbled back through the 3600 support level following another wave of selling. Anyone who thought the stock market would benefit from today's half point cut in interest rates to a record low of 0.5% and the launch of quantitative easing was quickly disabused. The FTSE 100 index fell 116.0 to 3529.9.
A futures related sell-off this afternoon saw Wall Street open sharply lower with the Dow left nursing a loss of 132.8 at 6742.9.
Charles Stanley reckons fund managers are maintaining their weightings in cash, which means they are forced to sell existing equity holdings to take up the large number of heavily discounted rights issues being lined up. Mining giant Xstrata fell 45¾p to 336¼p after shareholders voted to approve of its much criticised £4.1bn fundraiser.
Wolseley reversed an early lead to trade 15.7p cheaper at 165.4p. The world's biggest plumbing equipment supplier has confirmed recent City speculation that it is pondering a rights issue. It needs the cash. At the last count, debt had reached almost £3bn, while the value of the company had dropped sharply. Less than two years ago, the shares were changing hands at above 1300p but have been hit by the collapse in the housing market on both sides of the Atlantic.
Property companies recovered from recent sell-offs as the bears squared up their positions to turn their attention elsewhere. Hammerson rallied 10p to 235¼p and British Land put on 15¾p at 346¼p.
Goldman Sachs has raised buses and trains operator Go-Ahead, down 37p at 917p, from neutral to buy and added the shares to its conviction buy list.
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Tomorrow's Agenda
Comments from the sage of adland Sir Martin Sorrell on the world economy may, for once, be overshadowed by WPP's results. The world's biggest advertising agency is expected to announce major job cuts and the closure of some offices as it looks to cut costs.
Sorrell has been relatively optimistic about Wpp's performance this year, forecasting revenues to stay flat, with a recovery in the second half offsetting a decline in the first six months.
But stockbroker Numis is much more bearish. Its analysts predict a 5% drop in like-for-like sales in 2009 and a 3% fall in 2010. However, profits for 2008 are forecast to come in 12% higher than in 2007 at £919m, thanks to the triple-whammy of the presidential elections, Olympic Games and European Football championships.
Chelsea Flower Show sponsor Marshalls posts full-year figures. When the paving specialist last updated the market, it said it was looking to cut costs as homeowners stop splashing out on doing up their gardens. Its public-sector business, selling paving slabs to councils, is thought to be holding up well.
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