Tonight:
4°c
The optimism that City investors displayed at the start of the New Year has been blown away, with the London stock market heading for its fifth consecutive day of losses.
A big sell-off overnight in New York spilled over into Asia this morning as worries about the slump in the global economy and the US stimulus package gathered pace.
City investors are becoming increasingly anxious about our own economy. Their concerns have been heightened by gloomy surveys from the British Chambers of Commerce and the British Retail Consortium, while the UK's trade gap with the rest of the world has widened to £8.3 billion — the biggest deficit since records were started in the 17th century.
The FTSE 100 index responded with a fall 70.7 to 4355.4. The broader FTSE 250 was down 182.5 at 6503.4.
The Royal Institution of Chartered Surveyors tried to lighten the mood by pointing out that the pace of decline in house prices had slowed in December, but it countered this by pointing out that sales volume had hit a record low. Not good news if you happen to be a housebuilder.
Taylor Wimpey fell 5¼p to 19¾p following its latest trading update. Barratt Developments also lost 7¼p to 93p, Berkeley Group 32½p to 856p, Bellway 6½p to 612p, and Redrow 3¾p to 161½p.
Tesco rose 6.3p to 356.6p after its Christmas trading update. Brokers said it was in line with expectations, although it was the supermarket giant's worst performance in almost 20 years.
Rival J Sainsbury responded with a rise of a penny to 316¾p, while Wm Morrison, which reports next week, dipped 3¾p to 271¾p. The banks bore the brunt of the sell-off among blue-chips as they gave back most of yesterday's gains. City opinion says they will have to come back cap-in-hand to the Government later this year for another round of funding.
NCB Stockbrokers says Royal Bank of Scotland, down 5.2p at 49.8p, has a $3.5 billion exposure to the bankrupt Lyondell Chemical, equivalent to 5% of the bank's 2009 forecast net asset value. Barclays also fell 20p at 164.6p, with HBOS down 5.1p at 79p and merger partner Lloyds TSB, 8.8p off at 131.9p following the low take-up of its open offer.
Miners also came under fresh selling pressure, reflecting a further softening of raw material prices.
Rio Tinto fell 107p to 1500p and Xstrata 54p to 759p. Investec Securities has cut its target for BHP Billiton, 22p cheaper at 1220p, by 13% to 1600p on weaker commodity price forecasts. But it continues to rate the shares a buy and says the company has the sector's strongest balance sheet.
It could easily splash out $20 billion on an acquisition without strain. Investec has also cut Anglo American, down 45p at 1406p, from buy to hold and slashed its target by 43% to 1500p.
Merrill Lynch remains bearish about commercial property. “Assuming a 15% decline in underlying asset values in 2009, the sector is only trading on a 5% discount to our one-year-forward net asset value forecast. We do not see this as compelling. The leverage of a number of companies is not sustainable,” it warns.
Merrill is urging clients to switch out of Liberty International, down 15¾p at 497¾p, and into Hammerson, 26½p off at 524p, and out of Brixton, down 10p at 149¼p, into Segro, 7¾p cheaper at 256p.
Oriel Securities says commercial property values in the UK will continue to fall in 2009. “Our own forecast for the capital-growth performance of the sector in 2009 is a further decline of 11%, following on from a 27% collapse last year.”
Much of the bad news has been factored into share prices, but the decline in capital values has not. Oriel has downgraded the sector to underweight and says British Land, 27p off at 539p, and Land Securities, down 42p at 897½p, are rated a sell, while Liberty International and Hammerson are seen as reduce.
