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Shell-shocked London investors were today looking to claw back some of yesterday's losses after a steadier performance by Asian shares.
But confidence remains shaken, and the ease with which prices have crashed through support levels in the past few days suggests conditions are likely to remain fraught for some time. The FTSE 100 index sported a rise of 35.93 at 3661.76 after yesterday's sell-off saw shares slump to a six-year low.
The number of blue-chip companies cutting dividends is growing at an alarming rate, and that means there is less cash available to be reinvested in equities. This could have serious longer-term repercussions for the stock market if it persists.
Short-covering enabled HSBC, which rocked the City yesterday with a big drop in profits and a cut in the dividend, to rally 11p to 410p. Lloyds Banking Group added 1.4p at 50.8p but Barclays fell 2.4p to 85.3p.
Property giant British Land put on 9½p to 409½p, with rival Land Securities adding 5¾p at 504p. Both are due to go ex-rights after almost £1.5 billion of fund-raising in recent weeks.
Xstrata lost 258¾p at 338p after going ex the miner's £4.1 billion rights issue as trading in the nil-paid got under way at 128p. Dealers say the price of the nil-paid is being affected by a large number of short positions among the ordinary shares. Some institutional investors have protested about the group's cash-raising and $2 billion (£1.4 billion) takeover of Prodeco from Xstrata's biggest shareholder, Glencore. The acquisition enabled cash-strapped Glencore, with a 35% stake in Xstrata, to take up its rights entitlement.
RSA Insurance dipped 1.8p to 137.1p despite Morgan Stanley raising its target from 167p to 181p following full-year results last week. The broker has repeated its equalweight rating but warns the challenging investment environment and pressure on reserve releases could make it difficult to achieve earnings growth.
On AIM, Burst Media firmed 0.75p to 5.62p after admitting it had received an unsolicited bid approach in January, at between 6.3p and 7p a share. The offer was "unanimously rejected as wholly inappropriate and unreflective of the worth of the Burst business".
Oil and gas explorer Elixir Petroleum, unmoved on 0.039p, has become the latest in a wave of companies to cancel its AIM listing. It blamed the additional regulatory compliance burden, and said costs incurred in maintaining a secondary listing on AIM exceeded the benefits. Elixir also cited the relatively low volume of trading in its shares on AIM.
The financial whirlwind that played havoc with world markets yesterday hit New York overnight, sending shares plunging to 13-year lows. Growing fears the global recession is deepening, and a spate of gloomy corporate news, had investors beating a hasty retreat. They are having second thoughts about the viability of President Obama's economic stimulus package following news the US economy had shrunk 6% in the fourth quarter of last year.
Insurer AIG added to the gloom by weighing in with record losses and its fourth Government bailout while HSBC reported a big drop in profits, cut the dividend and tapped shareholders for £12.5 billion of emergency funding. The Dow ended down 299.64 points at 6763.29, the first time it had dropped below 7000 since 1996.
Tokyo shares slowed their decline after hitting a four-month closing low yesterday. Banking shares fell but investors picked up beaten-down exporters such as Sony. The Nikkei 225 Average hovered just short of a 26-year low before closing down 50.43 points at 7229.72. It had earlier slid to 7088.47, a level not seen since the 26-year low of 6994.90 last October.
Hong Kong shares lost more ground despite gains by Chinese counters ahead of China's annual parliamentary session this week. HSBC plumbed new lows, falling 17.8% to HK$46.80. The Hang Seng index finished down 283.58 points at 12,033.88.
