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London equities moved deeper and deeper into bear market territory on Tuesday, with financial stocks tracking Wall Street losses as investors lost faith in US government plans to protect US mortgage agencies. The FTSE 100 fell 3.2 per cent to 5,132.2, a loss of 168 points, as fresh weakness on Wall Street intensified the gloom, taking London's benchmark index to its lowest level since late October 2005.
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The losses took the FTSE 100 even further away from the 5,384 level at which it trades 20 per cent beneath its peak last summer, the technical definition of a bear market. The FTSE 250 was 1.4 per cent lower at 8,328.5, a loss of 117 points.
The sell-off was broad-based with only a handful of defensive stocks making small gains. On currencies markets, the dollar hit a fresh record low against the euro, as the US currency buckled under the pressure of a global equity sell-off as fears about regional bank failures persisted following IndyMac’s demise last week.
Doubts over Freddie and Fannie
Financial stocks led the fall after Wall Street indices failed to hold the gains inspired by US government plans to support Freddie Mac and Fannie Mae, which buy or finance almost half of the $12,000bn US mortgage market.
US indices fell fast for the second consecutive session. The Dow Jones Industrial Average gave up a further 1.8 per cent in a 197 point fall taking it to 10,861.7. The broader S&P 500 lost 24 points, or 2 per cent, to 1,204.0.
The selling intensifed as Ben Bernanke, chairman of the Federal Reserve told Congress it was very difficult for the central bank to judge the right way to balance serious risks to both growth and inflation.
Banks, financials fall
London’s Royal Bank of Scotland lost 8.3 per cent to 165p. Fund manager Schroders fell 5.5 per cent to 800p and Barclays was 6 per cent weaker at 253.8p.
Alliance & Leicester drifted back toward the overall 317p a share offer from Santander of Spain, as hopes for a bidding contest for the mid-cap bank faded. The shares fell 4 per cent to 321½p.
As the prospects for dealmaking in the financial sector cooled, Bradford & Bingley slipped 4.7 per cent to 50½p, 5p below the price of its pending rights issue.
Kazakhmys, which made sharp gains during the previous session after reports it was in merger talks with Russian miner Mettaloinvest, slipped 2.6 per cent to £14.76. There was caution in much of the rest of the sector. BHP Billiton fell 2.6 per cent to £17.02 and Antofagasta was down 3.2 per cent at 566p.
BT fell 3.2 per cent to 195½p after it suspended its share buyback in order to fund a £1.5bn investment in an improved UK broadband network.
DAILY TECHNICAL COMMENT
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MARKET DATA
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OVERSEAS MARKETS
US stocks slumped as investors rushed to sell Fannie Mae and Freddie Mac on speculation that a government bail-out could wipe out shareholders while oil prices spiked above $147, pummelling consumer-facing stocks. The Dow slipped below 11,000 for the first time in two years before recovering to 11,100.54, down 1.8 per cent. The Nasdaq Composite was 10.8 per cent lower at 2,239.08. Asia followed suit, with the Hang Seng tumbling 3.5 per cent to 21,240.41, and the index of mainland Chinese stocks traded in the territory slumping 5 per cent to 11,658.10. The Nikkei 225 dropped 2 per cent to 12,749.68.
COMMODITIES
Oil and aluminium prices eased on Monday, having reached record levels last week, as commodity markets staged a broad-based retreat, under pressure from a recovery in the dollar.
| Commodity | Last Close |
|---|---|
| Gold London PM | $939.50oz |
| August Brent crude | $143.92/barrel |
| LME 3-mth Copper | $8,270.50/tonne |
| Baltic dry index (freight) | 9,181 |
| December carbon | €27.26/unit |
FOREIGN EXCHANGE
The dollar pulled back from near-record lows on Monday after the US government announced a plan to support ailing mortgage agencies Fannie Mae and Freddie Mac, averting fears the currency could tip into freefall. The euro fell 0.3 per cent against the dollar to $1.5863 but remained almost 1 per cent higher than a week ago. Sterling strengthened after data showed UK factory gate inflation reached its highest annual rate in more than 20 years last month, strengthening the market’s view that the Bank of England would not cut rates any time soon.
| £1 EQUALS... |
|---|
| €1.253 |
| $1.996 |
| Sfr2.030 |
| ¥212.00 |
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-IC-1.5.0d-prod - 07/10/2008 17:37:17 - FurseJ
