BHP bucks the market slump

On another day of market turmoil, with the FTSE 100 falling 9% at one point before finally closing 5% lower, traders expressed some surprise that mining giant BHP Billiton managed to buck the trend with a 5.5% increase.

After all, metals prices continued to sink following yet more signs of recession, with copper falling to a new three year low. But BHP, which was in negative territory for most of the day, closed 45.5p higher at 868.5p, making it the biggest riser in the leading index. Other miners also saw a turnaround, as investors decided the sector may have been oversold, but not to the same extent.

There were various suggestions for the BHP increase, including share buying by the Chinese as part of a move to try and block BHP's bid for rival Rio Tinto, and investors covering short positions. The European Commission was also said to be ready to issue a statement of objections on the bid - areas that would need addressing - next week. Rio itself made a last minute recovery to close 37p higher at £22.77, while Antofagasta was 2.5p better at 276.5p.

Overall the mood was again volatile after a week of profit warnings from major companies, news that Chinese president Hu Jintao had described the economic situation as grim, and - so far unfounded - talk that a major US carmaker such as General Motors could go bankrupt. Attention has also moved from companies to countries, with growing worries that some may default on their debts.

The FTSE 100 closed down 204.47 points at 3883.36, with £49bn wiped off the value of Britain's top companies. At its worst, the index fell as low as 3715.24, following the release of UK GDP figures showing a worse that expected 0.5% decline in the economy in the third quarter. For much of the day, there were no risers at all in the top 100.

Predictions of a major share price collapse when Wall Street opened did not help. Trading on the Dow Jones futures was briefly halted after they fell 550 points, a big enough drop to set off automatic trading stops. But when the US market officially opened, investors' worst fears were not realised. With a higher-than-expected rise in existing home sales, the Dow Jones Industrial Average had fallen around 220 points by the time London closed - much better than the worst forecasts.

But the consequences of a prolonged recession were uppermost in investors' minds. Banks with major presences in emerging markets, which have become the latest cause for concern, were hit hard. HSBC closed 109p lower at 696p, additionally unsettled by a sell recommendation from Morgan Stanley and by UBS cutting its earnings forecasts for 2008 by 7% and for 2009 and 2010 by 10%. Standard Chartered, also strong in Asia, lost 142p to 758p. HBOS fell 12.9p to 59.9p despite Lloyds TSB, 6.2p lower at 165.8p, saying it hoped to complete its takeover of the mortgage bank by January 2009.

Barclays dropped 26.25p to 192p as UBS moved from buy to neutral, saying:

"Our earnings estimates for 2009 and 2010 for Barclays have been downgraded by around 45%. This is driven by two factors. First, a more difficult outlook for the UK economy has contributed to lower than previously expected top-line growth and higher impairment losses. This has reduced 2009 estimated pretax profit by around 25%. Secondly, although timing is uncertain, the issue of around £3.6bn of new equity prior to the end of March 2009 will lead to further dilution to earnings per share.

"We assume the new Barclays shares to be issued around 180p and until this equity issue is completed, we consider a neutral view on the shares to be warranted."

Oil continued to slide despite the attempts by Opec to curtail the decline by cutting production by 1.5m barrels a day. So BP slipped 25p to 440p while Royal Dutch Shell B shares lost 72p to £14.27.

Gases group BG fell 57p to 717p on talk it may be contemplating a £2.3bn bid for Australian group Queensland Gas Company.

David Montgomery's European publishing group Mecom continued its decline after yesterday's profit warning. It lost 20% to 2.95p as Royal Bank of Scotland analysts cut their full year profit estimates from £86.2m to £64.7m and said it could be a forced seller of its best assets because of its high level of debt. RBS said: "The shares represent option money on Mecom's survival."

Electrical retailer DSG International lost 3.75p to 21.75p. Panmure Gordon said: "We do not think that a dividend will be paid this year and are now reflecting it in our forecasts. All cash needs to be conserved, not just in DSG, but in all UK retailers, particularly – as is hopefully the case at DSG – if there is an opportunity to invest in high return assets to create value for shareholders once the recession is over."

Residential landlord Grainger dropped 43% to 72p after it offered to buy out holders of a tranche of convertible bonds due in 2014.