Yesterday's trading: Subprime still spooks markets

By Daily Mail Reporter
Updated: 02:49 EDT, 16 January 2008

It was enough to drive dealers to drink as the spectre of the sub-prime crisis returned to haunt stockmarkets.

All bets were off after Citigroup, America's biggest bank, confirmed worst fears and reported the biggest loss in its 196-year history and slashed its quarterly dividend by 41% as a result of surging defaults on dodgy home loans.

Meanwhile, Northern Rock crashed 13¼p more to an all-time low of 69¼p as investors sprinted for the exit before and after yesterday's egm bun fight in Newcastle which many believe made nationalisation of the heavily indebted bank an even bigger certainty.

As Wall Street plummeted 226 points in early trading on news of Citigroup's £9bn writedowns and much weaker-than-expected December retail sales, the Footsie nosedived 190.1 points to 6,025.6, its lowest close since early October 2006.The FTSE 250 lost 265.8 points to 9,765.8.

Banks were among the biggest casualties on fears that there could yet still be some sub-prime skeletons in their cupboard.

Britain's biggest, HSBC, which was the first to warn about US mortgages last February, fell 38½p to 772½p. Saudi British Bank, in which it has a 40% indirect stake, yesterday reported a 14% fall in profits. Royal Bank of Scotland shed 24½p to 392p and Lloyds TSB 19p to 406p.

Numis prompted heavy falls in the pubs sector after publicising a bearish online survey conducted by research company Peach Factory. It revealed that 81% of pub groups reported negative underlying sales over Christmas with not one reporting growth in alcohol sales. Even worse, some 55% of chief executives expect a trade downturn in 2008, with 82% forecasting a slump in January and February.

With that in mind, Numis downgraded its earnings forecasts for Punch Taverns ahead of today's agm. Shares of the largest pub and bars operator in the UK slumped 45½p to 618p as the broker shaved its 2008 profits by 3.8% and 5.5% for 2009. It assumes like-for-like sales of minus 1% in 2008 in the managed pub division.

Numis expects Punch to be at the forefront of sector consolidation this year. It has often been mentioned in the same breath as Mitchells & Butlers, 20¾p down at 387½p. Wouldn't major shareholder Robert Tchenguiz be pleased?

Rival Enterprise Inns fell 25¼p to 392p ahead of its trading statement tomorrow.

Broker Kaupthing expects the statement to refer to tricky trading conditions but does not believe the group will have to warn on the full year outlook because of the resilience of its business model.

Comet electrical retailer Kesa Electricals blew a fuse at 184¼p, down 18p, on fears it will tomorrow replicate the abysmal Christmas trading statement recently wheeled out by its Currys rival DSG International, 5p easier at 72p.

Miner Vedanta Resources jumped 52p on news it aims to produce 1m metric tons a year of aluminium in India by 2010 before rumours it is about to launch a bid for Canada's First Quantum Minerals prompted profit-taking. The close was 88p lower at 1990p.

It is never a good sign to see a director of a company selling shed loads of stock so when investors heard that Imperial Energy's chairman Peter Levine had trousered £27m by selling 1.5m shares at 1675p, reducing his holding to 6%, they followed suit. The close was 179p down at 1635p.

Buyers nibbled away at Dmatek, 8p dearer at 117½p, after the provider of electronic monitoringtechnologies said 2007 was its best ever year with revenues up more than 60%.

Aim-listed finance house Private & Commercial advanced 5p to 24p on a positive trading update. November was a record month for new business and the fourth-quarter was 86% ahead of 2006. It has signed a new £20m, three year, annually renewable finance facility with a new lender to finance its growing business.

Reflecting a rise in full year profits to £2.4m from £0.8m, architecture and design group Aukett Fitzroy Robinson edged up ¼p to 10½p. The shares stand on a prospective price earnings ratio of 7.1 times earnings and a 4% dividend yield. Shop broker JM Finn says buy.

Profit-taking following Monday's 29½p jump on news of a bid approach left healthcare company Meldex International 14½p easier at 69p. Rumours suggest former Bioprogress director and shareholder Barry Muncaster is interested and the take-out price could be north of £1.

• Bombed out biotech company Vernalis firmed ¾p to 6⅝p on a huge turnover of 37.7m shares. Dealers said a big overhang of stock had been cleared with rumours suggesting Piper Jaffray placed 27m shares at 6½p with institutional clients. Vernalis has been under the weather since Frova failed to gain approval for menstrual migraine from the US Food & Drug Administration but could now take a turn for the better.