Tonight:
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Tuesday 16 December update
Shares in private-equity giant 3i hit the skids for the second day in a row, tumbling to their lowest since floating 14 years ago.
The firm's debts are growing as the portfolio of companies it is invested in struggle to find an exit, leaving 3i's share price to taking a battering. It fell a further 26p to 252½p today, but only two million shares changed hands in what is known to be a notoriously thin market. As recently as August, the shares were changing hands at 956½p.
The sums 3i has invested in these companies is dropping and, at some stage, provisions will have to be made in order to reflect their lower value.
Arbuthnot Securities says 3i's gearing is around 50%, which is by far the highest of any company in the sector and will continue to grow as portfolio assets are marked down.
“Other cash-rich private equity companies are trading at a very large discounts compared to 3i, whose share price is falling to reflect this”, adds Arbuthnot.
There was not a lot else to cheer in the financial sector, either. Man Group, the UK's largest hedge-fund manager, fell 13½p to 240¼p, reeling from the Bernard Madoff fall-out. One of Wall Street's best-known names, Madoff has been accused of a £33 billion “Ponzi fraud”, using funds from new investors to finance payouts for existing clients.
HSBC, which may have lost up to a billion dollars with Madoff, fell 16¼p to 707¾p. Inter-dealer broker Icap was another weak market, losing 17½p at 277¼p. The price has collapsed from a peak of 728p since the start of the year, reflecting a slump in business levels.
Schroders firmed 5p to 850p, after touching 808p in a thin market. Credit Suisse has downgraded shares in the asset manager from outperform to neutral because it reckons they are fully valued.
Any further strong showing by the shares will be driven by merger and acquisition activity. The outlook for sales in mutual funds remain uncertain.
According to the number-crunchers, turnover yesterday on the London stock market slumped to its lowest in two years, with a total of fewer than 1.8 billion shares traded. The London Stock Exchange has altered the way it accounts for trades these days, which makes it difficult to compare like with like. I suspect there have been days this year, at the height of the banking crisis, when turnover failed to match yesterday's number.
Even so, it is difficult to remember when turnover levels last traded at such consistently low levels as they have in recent weeks.
Reflecting this, shares in the London Stock Exchange fell 29p to 569½p. They have come back from almost 2000p this year. Roll on the next takeover approach.
Shares generally were squeezed higher after a slow start as the official inflation rate lurched downwards to 4.1%, while staying way above the Government's 2% target. It seems investors are either taking the opportunity to start their Christmas festivities early or squaring up book positions ahead of the year end. The lacklustre conditions were reflected in the FTSE 100 index, which rose 34.7 to 4312.2.
Mining shares ran into another bout of selling. Platinum producer Lonmin fell 23p to 682½p, still reflecting on Deutsche Bank's move to slash its target from 1290p to 1011p after downgrading its platinum-price forecast. Rio Tinto was also down 75p at 1466p, Antofagasta 20p lower at 424¼p, and BHP Billiton off 47p at 1213p.
Cadbury Schweppes fell 13p to 544p following its latest trading update. Numis Securities has slashed its target from 770p to 550p to reflect the slowdown in North America — a higher margin business that has been growing market share in recent years.
Heritage Oil was among the best performers in second-liners, with the price adding 20p at 240¼p. It is a partner with Tullow Oil, up 45p at 616½p, in the Buffalo-1 project in Block-1, Uganda, which has just struck it rich. Heritage says the well has the potential to be the biggest field in Uganda.
