Footsie back below 4000 as Morgan sounds bear alert

The heavyweight broker said now is the time to decide whether we are nearing the end of the equities rally or whether this is the start of a long-lasting recovery, and Morgan is feeling bearish.

The FTSE 100 index has risen almost 14% in the past month while US stocks have enjoyed their best four-week run since 1933. Investors have been keen to latch on to any indications that the worst is behind us, sending shares across the globe soaring.

But analysts warn the bulls not to get over-excited, saying this has all the hallmarks of a bear-market rally, sparked by the hope of successful policy action. Morgan is advising "selling into strength", and is moving out of shares into bonds.

It warns that fundamentals are not turning, and it will wait for an improvement in earnings, the US housing market and banks' balance sheets before it calls time on the gloom.

The downbeat note caused London's shares to run out of steam, losing early gains to fall below 4000. The FTSE 100 index slipped 38.18 points to 3991.49, having earlier hit a high of 4097. Volumes were light because of the Easter exodus.

HSBC rose 14½p to 449p after revealing that its record £12.5 billion cash call won the backing of the market, with investors snapping up 96.6% of the stock on offer. Underwriters sold the rump of 172.7 million shares not taken up at 448p a pop. It is understood the rump was more than three times subscribed at the clearing price. The rights issue has improved HSBC's capital ratios by 150 basis points (1.5 percentage points), and will help offset losses from its US business Household, which is being wound down.

The bookies were toasting their Grand National bonanza today. Ladbrokes rose 2p to 204p and William Hill gained 1p to 197¼p after 100/1 outsider Mon Mome won Saturday's big race. The horse was the longest-priced for more than four decades to claim victory in the National, and William Hill took fewer than 2000 bets on it.

Credit Suisse cut their party short, cutting its target price for Ladbrokes from 235p to 202p. The broker is concerned about the effect on trading of rising unemployment and the regulatory risk.

Commercial property companies got a boost from news they are ending the war with retailers over charges and rents. Land Securities gained 15p to 498p while British Land put on 8¾p to 418¾p, Hammerson was 9¾p higher at 287½p and Liberty International jumped 9¼p to 429¾p.

One trader noted that they were better off with tenants who were paying less than with empty shopping centres.

The oil price climbed back above $53 a barrel today, but brokers are getting less keen on the titans of black gold. Bank of America Merrill Lynch has downgraded Royal Dutch Shell from buy to neutral and trimmed its price target from 1850p to 1650p, warning that margins will be under pressure for the rest of this year and into next.

Shell's recent strategy presentation has dented analysts' hopes that the performance of its exploration and production arm will improve. Bank of America Merrill Lynch now reckons volumes will fall in 2009 and 2010 before a modest recovery the following year. Shell A shares fell 22p at 1525p while the B shares sank 21p to 1496p.

Strong demand from businesses going green helped AIM-listed Camco International out of the red, the stock rising 2¼p to 11½p. The carbon-trading consultant made pre-tax profits of €2.2 million (£2 million) last year against a loss of €12.2 million in 2007. KBC Peel Hunt upped its rating on the group's shares from hold to buy.

Shares in CareCapital Group, a property minnow specialising in medical buildings, jumped 1.8p t o 6.5p after it said its management may be interested in taking the company private.