Thursday, August 21, 2008

Financial fears stalk FTSE

Financial fears stalk FTSE

By Michael Hunter

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London equities fell on Thursday, with further losses for financial stocks as renewed fears about the health of the sector spread round the globe.

The FTSE 100 lost 45 points in morning trade to 5,326.5., handing back the majority of the 45 point rally made during the previous session.

Financial stocks followed their US peers lower on returning worry about state-sponsored mortgage companies Fannie Mae and Freddie Mac as government officials appeared to signal a full scale rescue of the pair was more likely.

Schroders, the fund manager, was one of the biggest single fallers in London, down 3.1 per cent to 846½p. London Stock Exchange was 1.6 per cent weaker at 724½p and HBOS was 1.7 per cent lower at 275½p. Interdealer broker Icap fell by 2 per cent weaker at 454p.

There was a better showing from the mining sector after well-received maiden interim numbers from ENRC, up 2.9 per cent to £10.57. The Kazakhstan-based ferroalloys company which floated in London last December, announced profits of $2.05bn, up from $568m.

It also refused a request from its smalller compatriot, rival and shareholder Kazakhmys, which predominantly mines copper, for a seat on its board. The two rivals have long been linked with a potential merger. Kazakhmys, which recently lifted its stake in ENRC to 25 per cent, rose 2.9 per cent to £12.97.

Persimmon rose 13/1 per cent to 332p trade after its interim profit fell less steeply than feared. The mid-cap housebuilder said home sales in the period fell 31 per cent leading to a 64 per cent reduction in profit as market conditions remained very difficult. It also cut its dividend to 5p per share from 18½p.

But Mike Farley, Persimmon’s CEO, helped cheer the wider sector, saying declines in sales volumes had not worsened since April, offering hope the housing market slowdown could have bottomed out in April.

Panmure Gordon raised its rating on Persimmon to ”hold” from ”sell”.

The investment bank said: ”Interim results this morning contain few suprises, and we maintain our full year forecasts. While numbers look weak, we believe that they will be at the top end of the sector range.”

The rest of the sector also showed firm gains. Bovis Homes was 2.6 per cent higher at 409p, Taylor Wimpey rose 5.5 per cent to 43½p and Barratt Developments was 9.5 per cent higher at 123½p.

Overnight in New York, easing oil prices and better-than-forecast numbers from Hewlett Packard helped indices overcome the drag from the financial sector to make overall gains. The S&P 500 index closed up 0.6 per cent at 1,274.55 with the Dow Jones Industrial Average also rising 0.6 per cent to 11,417.43.

Asian equities were lower, as worries about further credit crisis-related losses deepened following a slide in profits at Babcock & Brown, the Australian investment bank. The MSCI Asia Pacific Index had lost 0.5 per cent by late morning in Tokyo.

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