FTSE in-depth: Japan crisis hits world economy
World stockmarkets were already facing a wall of worry before the Japanese earthquake and tsunami, but radiation fears and concern that the global economic recovery could be derailed sparked a rush of selling that affected every major financial centre.
Unclear: What will fall-out from nuclear crisis be on global stockmarkets?
Japan's Nikkei index crashed an incredible 17% in two days of panic, wiping around £400bn off the value of Japan's biggest companies.
But thankfully it has since regained composure and dealers and investors everywhere have heaved a collective sigh of relief.
The Footsie was sold down to 5,595 on Tuesday to stand more than 8% below its 52 week high of 6,105 achieved only three weeks ago. But despite doom and gloomsters predicting a further fall well below 5,500 it has rallied strongly. It closed yesterday 22.02 points better at 5,718.13 to end a traumatic week only 1.8% lower. It could have been a lot worse.
Wall Street opened with a gain of 112 points after Libya announced a ceasefire which raised the prospect of a swift resolution to problems in the Middle East. The decision by the G7 or group of seven largest industrialised nations to intervene in the currency markets to restrain the runaway Japanese Yen, also gave sentiment a big lift.
National Grid surged 24.5p to 576.5p after Credit Suisse upgraded the energy utility sector to overweight from underweight. The broker views the Grid as a cheap indexlinked bond proxy and an inflation hedge. It also has an 'outperform' rating on Centrica, 10.1p better at 328.25p.
Shrugging off reports that around 450 jobs are about to go at the Farnborough-based defence group, BAE Systems climbed 11.3p to 318.45p.
Revived private equity bid rumours accompanied a gain of 7.6p to 336.4p in technology services group Invensys. Chip designer ARM Holdings lost 22.5p to 510.75p after Matrix initiated coverage with a reduce rating. The broker believes Japanese supply problems after the earthquake there make it vulnerable. There are growing concerns that the supply chain problems in Japan may delay production of smartphones and tablets this year.
Mobile phone giant Vodafone slipped 1.5p to 169.975p despite director Luc Vandevelde's purchase of 12,171 shares at 170.03p a pop. F&C Asset Management eased 0.35p to 77.825p after touching 79p on news of new chairman Edward Bramson's acquisition of 180,000 shares at 78.58p a share. He recently replaced Nick MacAndrew as chairman in a boardroom shakeup instigated by rebel investor Sherborne, which was founded by Bramson. Buyers chased Aberdeen Asset Management 6.7p higher to 205.15p amid industry gossip that the fund manager has been trading its socks off. Peel Hunt recently advised clients to buy and lifted its target price to 270p from 245p.
Analyst Stuart Duncan pointed out that the shares had fallen 7% over the previous month on concerns relating to flows to emerging market products. But he highlights the diversity of Aberdeen's product offering, amid signs that investors had already started to look at other areas.
Dealers pooh-poohed mutter from the gutter that Mitsubishi UFJ Finance Group, one of Japan's largest banks, which already sits on 16.4% of the equity, could be interested in launching a full-scale bid for Aberdeen, or add to its holding soon.
Takeover speculation put the fizz back into shares of soft drinks company Britvic, 10.1p up at 383.95p. There were revived whispers that Diageo (4p dearer at 1142.5p) could be interested. Five years ago European private equity group Permira considered buying the group but walked away.
Shares of Gulf Keystone Petroleum gushed 38.25p to 161.75p after reporting a significant initial oil flow on the Shaikan-2 Appraisal Well in its licence in the Kurdistan region of Iraq. Broker Fox Davies raised its target price to 220p from 200p because of the increasing probability of the well being a success. Gulf Keystone has a 75% working interest in the Shaikan block.
Superdry fashion company Supergroup jumped 57p to 1510.5p after Finance Director Charlie Howes splashed out over £50,000 on buying 3,500 shares at 1435p a time. On the other side of the street, rival clothes retailer Next eased 12p to 1939.5p on profit-taking ahead of next Thursday's annual results.
Despite lower-than-expected full year profits, a halved dividend and a warning that trading in 2011 will be challenging, electrical and mechanical services installer T.Clarke rose 11.5p to 95.75p on recovery hopes.
Iodine supplier Iofina advanced a further 1.88p or 8% to 25.25p. It is ramping up production to cash in on rising prices and soaring demand for anti-radiation tablets in the wake of the Japan nuclear crisis.
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