Market report: Thursday close
The cracks in the banking sector have started to spread far and wide in the wake of the subprime mortgage meltdown in the US.
Today it emerged that Deutsche Bank will have to make write-offs totalling hundreds of millions of pounds in the third quarter.
Chief executive officer Josef Ackermann has admitted Germany's biggest bank made mistakes that will force it to write down the value of leveraged loans totalling $41bn (£20.4bn) and scrap plans to hire any new staff.
JP Morgan Chase says the Frankfurt-based bank will have to write off about €625m (£419m).
This comes just a day after Morgan Stanley announced a 7% drop in third-quarter earnings as it wrote off £490m of bad and doubtful loans. Earlier in the week, Lehman Brothers took a $350m hit on its loan book.
Meanwhile, in London things were going from bad to worse for Northern Rock after the Bank of England said it would not underwrite new accounts. Citigroup has slashed its target from 400p to 150p and warns the worst-case scenario could be as low as 6p.
More than 125 million Northern Rock shares changed hands as the price slumped a further 71.8p to 185.2p, after briefly touching a low of 176p, leaving private investors, who had been punting on a white knight to emerge, nursing sizable losses. Said one dealer: 'The message from Threadneedle Street is: you are on your own'.
Other losers included Alliance & Leicester, down 60p at 755½p, HBOS, off 37p at 837p, and Bradford & Bingley, shedding 28&frac;14p at 299¾p.
Shares generally were on the slide as the credit rating meltdown came back to haunt City investors. Despite another solid performance overnight on Wall Street, the FTSE 100 index fell 31 to 6429.
Morgan Stanley waved goodbye to outgoing BT Group chairman Sir Christopher Bland with a downgrading of the telecom giant's shares. Bland steps down today after presided over major changes in the group's market place which culminated in it selling mobile phones operation O2. BT slid 5¾p to 308¼p after MS cut its rating from equalweight to underweight and its target by 6% to 340p.
The American broker prefers Vodafone, up 2.6p 171p, which it rates overweight with a target of 195p, and and Cable & Wireless, down 1.9p at 175.3p, which is rated overweight with a 212p target.
Keller, down 13p at 1064p, is selling its social housing division to Mears for a nominal sum. Mears, up 3¼p to 271¾p, said the assets being bought comprise social housing maintenance contracts with a number of local authorities. The annual revenue from these contracts is estimated at around £10m.
Wincanton was down 2p to 366¼p despite a bullish trading update from the trucker which showed contractual renewals with B&Q and Comet and new business from the likes of adidas.
Wall Street extended this week's gains overnight as investors continued to reflect upon the decision of the Federal Reserve chairman Ben Bernanke to cut rates aggressively by half a percentage point. Chief beneficiaries were the banks and housebuilders-which will benefit directly from cheaper money.
Investors felt confident enough to shrug off third-quarter results from Morgan Stanley showing a 7% decline in earnings after the banking giant became the latest casualty of the credit meltdown. It has had to write down bad and doubtful debts worth $940m (£470m). The Dow ended yesterday's session 76.17 higher at 13,815.56.
Overnight, Tokyo shares rallied from a nervous start that saw chipmakers such as Advantest sold off because of declining orders. This offset the benefits accrued by commodity-related companies. Dealers said investors had also begun selling after the Nikkei repeatedly failed to breach the 16,500 level. It eventually closed 32.25 higher at 16,413.79.
Hong Kong shares traded at record levels, and the Hang Seng index was up 83.97 points at 25,638.61 by lunchtime.
TAKING STOCK
BANKING AND FINANCE
Dresdner Kleinwort has raised Aberdeen Asset Management from add to buy following its acquisition of Nationwide Financial's active US asset management business. The deal broadens Aberdeen's capability in the US, and it can now offer a wider range of equity funds.
BUILDING AND PROPERTY
Black Sea Property Fund is convening the EGM requisitioned by QVT Fund to remove chairman Melville Trimble and director Roger Maddock for 29 October. It is urging shareholders to vote against the measure.
CONSUMER
Belgium-based brewer InBev may sell its German breweries producing Diebels, Gilde and Loewenbrau and concentrate on core brands Beck's and Franziskaner. Inbev has made a series of asset disposals recently in order to cut costs.
ENGINEERING
UBS reckons the collapse of its jointventure deal with General Electric has left Smiths Group vulnerable to takeover bids. The advanced technologies firm may also be forced to sell its scanning section if it cannot find new partners for the business.
HEALTH
Biotec group OncoMethylome Sciences says its colorectal cancer programme showed 'strong performance' levels in trials. It successfully identified accurate markers for detecting early-stage colorectal cancer via stool samples.
INDUSTRIALS
BAE's shares jumped as Deutsche Bank raised its price target from 525p to 550p and urged clients to buy the defence contractor's stock. The broker believes that the Eurofighter deal with Saudi Arabia will pave the way for further defence contracts in the region.
LEISURE
Investec has upgraded restaurant group Prezzo's rating from sell to hold and raised the target price from 65p to 69p after an improvement in operating margins. The chain of eateries continues to expand, opening 17 new units so far this year.
MEDIA
Trinity Mirror continues to struggle, with JPMorgan reducing its target price for the newspaper publisher from 508p to 480p. Sales at its principal title, the Daily Mirror, are taking a hit from repeated cover-price cuts at its main rival The Sun.
NATURAL RESOURCES
Alkane Energy returned to the black in the first six months with a pre-tax profit of £337,000 against a £1.25m loss a year earlier. The renewable energy producer said its UK operation and 38%-owned German associate Pro2 had both performed better.
RETAILING
Investment banks have slashed their price targets for Debenhams in response to the ailing retailer's poor trading figures on Tuesday. The department stores chain offered huge markdowns to clear stock to ensure it had space for new merchandise.
SUPPORT SERVICES
Chief executive Ian Bowles has lifted his total holding in Manpower Software to 98,500 shares, or less than 1% of the company. Bowles has bought a parcel of 5000 shares in Manpower at
53.2p each, or £26,600, and a further 43,500 shares, or £23,011 worth, at 52.9p.
TECHNOLOGY
Misys's results were a curate's egg. While its banking sector grew 19% as treasury services pushed it ahead of expectations, analyst Derek Brown of Seymour Pierce described the software provider's healthcare division as 'corpse-like' after sales fell 16%.
TELECOMS
Deutsche Telekom will market Apple's iPhone in Germany from 9 November. The device will cost e399 (£267) along with with a T-Mobile contract. Deutsche's subsidiary T-Mobile will receive the distribution rights for Austria and the Netherlands.
TRANSPORT
Ryanair Holdings has urged Malta to open its doors to more cheap flights after announcing a new route from the island to Venice. Ryanair began flights from the island's airport last October and expects to deliver some 300,000 passengers next year.
UTILITIES
Lower energy prices could result from the EC's decision to demand the 'unbundling' of Europe's major power companies, says consumer group energywatch. The move could force the likes of EDFto split its London network and supply businesses.
Most watched Money videos
- 2025 Aston Martin DBX707: More luxury but comes with a higher price
- Fiat pledges to cease grey car production as they launch new EV
- Land Rover unveil newest all-electric Range Rover SUV
- Blue Whale fund manager on the best of the Magnificent 7
- Tesla unveils new Model 3 Performance - it's the fastest ever!
- Mercedes has finally unveiled its new electric G-Class
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Mini Cooper SE: The British icon gets an all-electric makeover
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- How to invest for income and growth: SAINTS' James Dow
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- Mini celebrates the release of brand new all-electric car Mini Aceman
- Avon Protection handed £38m gas mask contract by MoD
- MARKET REPORT: North Sea giant Harbour closes in on £9bn...
- Bailey pulls his punches on interest rates yet...
- BBVA goes directly to shareholders as it steps up bid for...
- Bank of England paves way for Britain to cut interest...
- Watches of Switzerland buys Italy's Roberto Coin Inc for...
- ITV hit by Hollywood strikes as it pins hopes on Euros...
- BAE Systems tools-up for growth as Britain plots defence...
- Ford confirms it will cull another of its best-selling...
- Takeover target Wood Group hit by slump in revenues as...
- Used car sales hit a five-year high as fresh supply of...
- Mortgage rates are climbing again - should we be worried?...
- Why we need more than a British Isa to move the dial on...
- BUSINESS LIVE: BoE base rate decision; ITV eyes ad market...
- ITV hopes for summer ad boom as it continues to reel from...
- Vodafone told to boost security as £15bn Three merger is...
- Cameron left red-faced as Greensill sues Government over...
- Two in five believe ovens will become obsolete as the air...