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Share prices plunged back below the 3700 support level today to trade at their lowest for six years after Europe's biggest bank, HSBC, waded into the Square Mile to tap shareholders for a record £12.5 billion.
The London stock market appears to be suffering from a severe bout of rights-issue indigestion, with billions of pounds worth of fundraising programmes already on the blocks. There are also more major companies queuing behind HSBC pleading for emergency cash to be doled out.
Battered broadcaster ITV, down 1¼p at 23½p, property developer Segro, the old Slough Estates, 25¾p off at 81½p, and Premier Foods, ¼p cheaper at 29¾p, are also tipped to be tapping shareholders in the short term. But for how much longer will fund managers be happy to keep dipping into the coffers to keep companies afloat?
Investors were feeling far from charitable today as they watched the value of the portfolios continue to shrink. Further evidence that the US economy is sliding deeper into recession prompted another sell-off on Wall Street on Friday. That spilled into Asia today. There are growing fears that President Barack Obama's $1.7 trillion stimulus package may not be enough.
Back in London, the FTSE 100 index tumbled 142.71 points to 3687.38, its lowest since April 2003. The banks led the retreat with the subsequent fall in HSBC's share price of 92p at 399¼p accounting for more than 60 points of the fall in the Footsie 100.
Japanese broker Nomura has slashed its target for Royal Bank of Scotland, down 0.8p at 22.4p, from 34p to 20p while cutting Lloyds Banking Group, 6.2p lower at 52.1p, from 72p to 42p. Standard Chartered, which like HSBC has big interests in the Far East, tumbled 64p to 600p ahead of full-year results tomorrow.
Life assurer Prudential shed a further 12¼p at 268¼p. It is in the running to buy the Asian assets belonging to American International Group, the world's biggest insurer, which is about to receive a $30 billion cash injection from the US Government - its fourth to date.
Miners also came under selling pressure amid continued signs of falling demand for raw materials. Rio Tinto shed 76p to 1725p, Anglo American 64p to 937p and Xstrata 59½p to 636p.
Outstanding rights issues totalling almost £1.5 billion continue to drag on the property sector. British Land, down 67¾p at 390p, came under further selling pressure along with Land Securities, 51½p cheaper at 497½p. They have still to go ex-rights, and there are mounting fears the bulk of their issues will be left with the underwriters. Hammerson, which went ex-rights last week, fell 15p to 228p. Citigroup has repeated its buy rating and tweaked its target 4p higher to 275p.
Morgan Stanley remains overweight in BP ahead of tomorrow's strategy review. Its target of 650p implies there is scope for a 45% improvement in the current share price of 433p, down 15¼p. BP's management is expected to confirm that the group is well-positioned to weather a substantial and prolonged downturn in the macro-environment.
The broker says sticky costs, a deteriorating downstream and lower commodity prices imply substantial downgrades to consensus earnings for the integrated oil and gas companies, and BP will not be immune. But it adds that, with the shares yielding 9%, these risks, alongside concerns on the dividend, look priced in.
Tate & Lyle dipped 1¾p to 263¼p after UBS lifted its rating from sell to neutral. It cut its target from 315p to 270p because the sweeteners producer is closer than thought to breaching banking covenants. But it says any downside in the shares seems limited, despite the deteriorating economic environment and a possible delay to the start-up of its new Fort Dodge starch and ethanol plant in Iowa.
On Plus, Pangea Diamond Fields firmed 0.3p to 2.15p after meeting all the conditions of its placing and open offer to raise $12 million (£8.5 million).
