Traders were struggling to get a handle on the market again yesterday, as volatility in shares, currencies and commodities continued after Wednesday's falls. Following some ups and downs during the day, leading shares closed virtually unchanged, with the FTSE 100 down 3.9 points at 5,671.6, having traded in a near 100-point range. Volume was heavy, with 3.57bn shares traded.
The UK market had spent much of the day waiting for guidance from Wall Street but in the end the wait was in vain. The Dow Jones Industrial Average was up around 20 points by the time London closed - not enough to sway sentiment either way. The FTSE 250 lost another 1.52%, and the Small Cap index was 1.69% lower.
Market watchers were in the main suggesting that the current uncertainty marked a necessary correction rather than a full-blown crash.
Exane BNP Paribas said a global market slump similar to the one in October 1987 was unlikely but felt further weakness could come. It said profit-taking was one of the main reasons for the falls, with the firms that had risen the most in the first four months of the year showing the biggest recent drops.
Tony Dolphin, of Henderson Global Investor, said the gains since the beginning of the year had been unsustainable and, with the economic outlook more uncertain than for some time, it would be a while before equity markets fully recovered their poise. Paul Niven, of F&C Asset Management, said: "Ahead of this pullback in equity markets ... there was a large element of complacency over the outlook for global inflation and interest rates." He thinks the market will probably end the year higher but there will not be a rapid rebound.
Unlike Wednesday, corporate news had some influence on events. BT reported full-year profits of £2.17bn and issued an upbeat statement, to pretty much general acclaim. Its shares led the list of FTSE 100 risers, up 17p to 226.24p. Seymour Pierce said BT's shares were attractive, and gave them an outperform recommendation, while Corporate Synergy said the company was a defensive stock that should perform well in the current difficult market. Barclays Stockbrokers was less enthusiastic, raising concerns about rising competition in broadband.
Retailers were also in demand following strong high-street sales last month. DSG International - Dixons to you and me - climbed 3.75p to 200.75, despite a rather ambivalent note from Morgan Stanley. The bank's analysts were cautious about the company, and have a 155p target on the shares. They expect them to hold up in the short term, as the group benefits from the World Cup effect on TV sales and a better market for white goods such as refrigerators and washing machines. But, longer term, they expect DSG to be hit by increasing competition, rising interest rates and the prospect of another regulatory review of the lucrative warranties market.
Other high-street groups on the rise yesterday included Kingfisher, 4.25p better at 230.75p; GUS, 16p higher at 983p, and Next, up 18p to £16.82. An exception was Boots, down 11p to 711p after a 10% drop in annual profits. Its merger partner, Alliance Unichem, fell in sympathy, down 10.5p to 903.5p.
Among the other losers, housebuilder Persimmon was the biggest faller in the FTSE 100, down 53p to £11.48 on worries about higher interest rates after this week's Bank of England minutes hinted at dearer money before too long. SABMiller - the only FTSE 100 share not to lose ground in Wednesday's sell-off - dipped 33p to £10.61 after reporting an 8% rise in earnings while issuing a cautious outlook statement. CSR, the market leader in chips using Bluetooth wireless technology, fell 64p to £13.02. Merrill Lynch started covering the company with a hold recommendation and a £13.60 target. It thinks the shares could go higher in the short term as profit forecasts are revised upwards but further out, the company is likely to face slowing sales. It told clients to take profits on any strength in the share price.
The speciality chemicals group Yule Catto added 4.75p to 241.25p after the company told shareholders at its annual meeting that first-quarter results were ahead of last year despite difficult markets. The soap and detergent maker PZ Cussons rose 139p to £13.64, rallying after being hit earlier in the week by currency concerns. There was also said to be some vague speculative interest.
A better-than-forecast set of results from the engineering software business Aveva saw its shares climb 18p to £11.70. ABN Amro analysts were positive on the figures and put a buy recommendation on them, as did Shore Capital.
Going the other way was technology group Morse, which turned in one of the worst performances of the day. Its shares fell 18.25p to 80.75p as the firm said its German and Austrian businesses were likely to incur a £1m loss between them for the second half. Panmure Gordon cut its target price from 110p to 95p and reduced its profit forecasts by 22% for this year. It thinks there is some good news to come from the firms on its mobile business, but that this is being buried at the moment by bad news from elsewhere in the group.
Eastern promise
The online gaming company Betonsports added 3p to 160p as it doubled its presence in the Asian market with the acquisition of Hooball and its 777ball betting site for an initial $22m (£12m).
The businesses mainly take bets from China, where the online gaming market is said to be growing at about 34% a year, and last year made a $3.6m profit. Betonsports, which also has operations in the United States and South America announced a 12% rise in full-year profits to $14.9m and gave an upbeat outlook for the current year.
Analysts at Altium Securities like the look of the business, especially given recent moves to strengthen the company's management team, and have an add recommendation on the shares.