Stock market report: Wednesday close
It was not so much an Obama Bounce as an Obama Flop in London and New York today. Wall Street and City investors appeared underwhelmed by Barack Obama's historic Presidential victory in the US, with share prices showing big losses from the outset.
Movers: Latest news from the stock market
This may not be so surprising - the London stock market has enjoyed a bounce of six consecutive days of gains, and has risen almost 20% in the past eight trading sessions after hitting a five-and-a-half-year low.
Wall Street has rallied almost 15% since hitting a low point last week. Does this signal the bottom of the market, or is it just a bear-market rally? Morgan Stanley, which called the top of the market in June 2007, yesterday decided now is the time to start buying.
But Deutsche Bank today said the temptation will be to cut any longs built up, and maybe even get ready to sell the market. Market strategist Osman Hussein said: 'I believe, however, that any pullback should be used to top up longs and cover any remaining shorts, rather than a signal to sell. I remain acutely aware of all the problems we still face, and which will likely see us hit new lows in the first quarter next year. I am still very much a long-term bear.'
The FTSE 100 index dived, before recovering to 4495.7 before falling again, 108.77 points at 4,530.73. The Dow dropped 198.16 to 9427.12.
An employment survey tonight showed US firms slashed 157,000 jobs last month, the most in six years and well above the 26,000 cut in September. Carmakers, retailers and companies connected to the housing market suffered particularly badly.
Meanwhile, the UK economy continues to head toward recession with the latest Purchasing Managers Index showing the services sector contracted at its fastest pace for 12 years last month. The Bank of England monetary policy committee is expected to cut base rates by at least half a point tomorrow, but Deutsche Bank is telling clients it will cut them by a full point to 3½%.
The miners led the blue-chip sell-off, worried by gloomy guidance for next year from steel producer ArcelorMittal. It is cutting output from 30% to 15%. Less steel means lower demand for other raw materials such as iron ore - bad news for the miners. Lonmin was down 107p at 1166p, Vedanta 91½p at 908p and Xstrata 114p at 1190p.
Russian gold miner Peter Hambro climbed 8.44% to 305p after postponing a move to a full listing for its shares because of the banking crisis.
Anglo American, 110p lower at 1557p, has increased its stake in Nautilus Minerals from 5.7% to 11.1% with the purchase of 8,933,702 ordinary shares. Nautilus, up 6p at 73½p, is not your run-of-the-mill miner. It digs for minerals off Papua New Guinea, an area in which Anglo had not been involved.
Brokers' downgradings continued to take a toll of second-line companies.
Builder Rok tumbled 38½p to 35¼p after Panmure Gordon dropped its rating from buy to sell and slashed its target from 90p to 40p. This followed a profits warning, which blamed a deterioration in regional operations.
Industrial materials provider Cookson fell 29¼p to 209¾p as Pali International dropped its target from 350p to 170p on the prospect of a rapid downturn in the steel industry, which is likely to cause sharp swings in profitability for suppliers. Marks & Spencer rallied 6¼p to 244¾p on the back of results from rival Next, up 64p at 1189p.
Numis has cut the smaller marketing services groups after third-quarter announcements from the big boys such as WPP, down 7¼p at 400½p, and Omnicom.
It has lowered its price targets for Chime, down 0.75p at 73p, (target down from 133p to 128p), Huntsworth, ¾p firmer at 39¼p (cut from 64p to 59p), M&C Saatchi, unchanged on 87½p (reduced from 112p to 100p) and Motivcom, steady on 64p (down from 95p to 82p).
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Tomorrow's agenda
A rate cut is almost a dead cert when the
Bank of England's monetary policy committee meets, but the question is by how much? With the economy widely acknowledged to be in recession, rate-setters are under pressure from economists, business leaders and builders to opt for a 1% reduction. Arch-dove David Blanchflower is likely to back that, but experts say the rest of the MPC will vote to match last month's half-point cut, reducing rates to 4%.
Private-equity firm 3i and hedge fund giant Man Group both report, and are expected to have suffered in the miserable economic environment. Shares in 3i, whose acquisitions have included luxury lingerie brand Agent Provocateur, have plunged in the last month amid concerns it will announce a big drop in the value of its investments. When Man last updated investors, it admitted to a £2.8bn fall in funds under its management, as a result of the market turmoil.
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