Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:13 EDT, 23 September 2008

Bank shares took another bashing today and this time there wasn't a shortseller in sight. The City watchdog banned the practice of selling short last week in order to protect the banks from their own folly. It doesn't appear to be working.

Movers: Latest from the stock exchange

So much for Friday's relief rally. It was inspired by the US Treasury's plan to buy in all the toxic debt produced by the banks at a cost to the American taxpayer of $700bn. But now there are those in Congress who don't think the plan will work anyway. Dealers ask, what is the alternative?

That provided the signal for another sell-off on Wall Street overnight, which spilled over into Asia this morning and then London. The FTSE 100 index slumped 100.14 to 5136.12, despite the Bank of England pumping a further £22bn into the overnight money market to improve liquidity. The broader FTSE 250 lost 227.5 at 8525.5.

This afternoon on Wall Street investors managed to regain their composure despite further weakness in shares of Morgan Stanley. The Dow rose 105.5 to 11,121.2.

Back in London, some of the biggest losses were seen among the cash-strapped banks which are on a list of 29 companies protected by the Financial-Services authority from short-selling-Hedge funds, and others, who want to short-sell more than 0.25% of the shares in any one company, must now declare it.

Leading the way down was HBOS, already the subject of a shotgun £12.2bn merger with Lloyds TSB. Its shares fell 23.7p to 185.3p and trade well below this summer's £4bn rights issue, priced at 275p. Lloyds TSB was down 15½p at 259½p. There were also losses for Royal Bank of Scotland, down 15p at 201p, and Barclays, 17¼p at 355¾p.

Financials came under the hammer with hedge fund operator Man Group down 35½p at 388p, and interdealer broker Icap off 20½p at 407¼p. Neither are on the FSA 'at risk' list and will suffer from the ban on short-selling.

Oil and gas explorer BG Group replaced an early lead with a fall of 23p at 1152p. A little bird tells me the company paid a visit last night to the offices of Credit Suisse, where it made a favourable impression. Could it have something to do with the huge reserves expected to accrue from the group's stake in the Santos Basin project of Brazil?

Deutsche Bank has downgraded Marks & Spencer, 4½p cheaper at 233p, from buy to hold and has slashed its target from 380p to 260p. It says it cannot see any initiatives being introduced to get the retailer back on track. Rising costs are likely to offset any improvement in margins.

Punch Taverns fell 27¾p to 185p with the other pub chains on the back of a gloomy view of prospects from rival Mitchells & Butlers, down 17p at 255½p. Goldman Sachs says it now owns 18.9m shares, or 7.11% of Punch Taverns, worth £34.3m. Unfortunately, it does not say how much it paid for them.

The economic downturn and recent turbulence on financial markets will only add to the difficulties facing newspaper publishers, already hit by a slump in advertising revenue, says JPMorgan. It expects regional advertising revenue to decline by at least 10% this year, extending to 14% next year, while national advertising revenue will decline 6% this year and 10% in 2009.

One of the most vulnerable publishers in the downturn is Trinity Mirror, down 11¼p at 102¼p, where JPMorgan has slashed its target from 125p to 120p. It continues to rate the publisher of the Daily Mirror at underweight. Not all areas are feeling the economic slowdown. Luxury goods group Burberry, off 28p at 405¾p, is seen by Morgan Stanley as well placed to outperform most of its rivals. The broker has begun coverage of the shares with an overweight rating and 530p target.

Tomorrow's agenda

The CBI publishes its barometer of trading on the High Street. Last month, sales in UK stores hit their lowest in the survey's 25-year history as the miserable summer weather and housing market slowdown stopped shoppers parting with their cash. analysts forecast September's survey will show shoppers have reined in spending further, particularly on big-ticket goods. The survey is expected to be at odds with recent figures from the ONS, which showed retail sales growing, fuelling concerns over the quality of the Government's data.

Britain's biggest cigarette company Imperial Tobacco is expected to calm investors' nerves when it updates the markets on trading. Despite signs customers are trading down to cheaper brands to save money in the UK, the company is expected to say sales are holding up. It is expanding its operations in emerging markets of Eastern Europe, Africa and Asia, where demand for quality brands is growing.