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Harry Hedge Fund and his mates have made a fortune selling the financial sector short today. Stock-market bears thrive on bad news and there is no shortage of it these days.
Barclays slumped 11.8p to 74.5p amid claims that the real extent of write-offs by the bank could be double what it has, so far, owned up to.
Banking analyst Sandy Chen at Panmure Gordon has slashed his target for the shares to 40p. Chen, a big bear of the banking sector for some time, reckons the outlook for Barclays is worse than the City has been led to believe.
He warns that the structure of swap agreements limiting Barclays' credit losses "could buckle", and reckons the bank will book £13 billion of impairment charges this year and next. That is double the guidance provided by Barclays' management.
He is forecasting that Barclays will plunge into the red this year with losses of £5.3 billion followed by a deficit of £4.1 billion in 2010.
Meanwhile, the liquidators of Lehman Brothers have asked Barclays to reveal the whereabouts of an estimated $3.3 billion (£2.3 billion) earmarked for bonuses, which it received when it bought the North American assets of the bank last year for $1.5 billion.
Other banks to come under the hammer included Lloyds Banking Group, down 5.7p at 42p, HSBC, off 21¾p to 379¼p, and Royal Bank of Scotland, 0.4p lower at 22.3p.
Life assurer Aviva could not have imagined when it unveiled full-year results today and promised to maintain the dividend that its shares would respond with a drop of almost 30%. They plunged 81p to a record low of 204p, dragging other life assurers with them.
Brokers such as Panmure Gordon and Cazenove were fairly upbeat about the numbers, but Deutsche Bank has cut its rating from buy to hold. City gossips say Aviva can't afford to maintain the dividend with the current balance sheet.
They whinge about creative accounting and say Aviva's numbers do not stand up to close scrutiny. The gossips may turn out to be wrong, but their assertions created havoc in the financial sector, pushing others sharply lower. In fact, life assurers accounted for six of the 10 biggest fallers among blue-chips. Prudential slumped 49p to 227¼p, Friends Provident 10.3p to 59.9p, Legal & General 5.2p to 32.2p and Standard Life, 16.4p to 146.2p.
But the life assurers were not the only ones targeted by the short-sellers. Shares generally tumbled back through the 3600 support level following another wave of selling. Anyone who thought the stock market would benefit from today's half-point cut in interest rates to a record low of 0.5% and the launch of quantitative easing was quickly disabused. The FTSE 100 index fell 70.98 to 3574.89. A futures related sell-off this afternoon saw Wall Street open sharply lower with the Dow left nursing a loss of 132.8 at 6742.9.
Charles Stanley reckons fund managers are maintaining their weightings in cash, which means they are forced to sell existing equity holdings to take up the large number of heavily discounted rights issues being lined up. Mining giant Xstrata fell 26p to 356p after shareholders voted to approve of its much-criticised £4.1 billion fundraiser.
Wolseley reversed an early lead to trade 3.5p cheaper at 177.6p. The world's biggest plumbing equipment supplier has confirmed recent City speculation that it is pondering a rights issue. It needs the cash. At the last count, debt had reached almost £3 billion, while the value of the company had dropped sharply. Less than two years ago, the shares were changing hands at above 1300p but have been hit by the collapse in the housing market on both sides of the Atlantic.
Property companies recovered from recent sell-offs as the bears squared up their positions to turn their attention elsewhere.
Hammerson rallied 16¼p to 241½p and British Land put on 25½p at 356p.
Goldman Sachs has raised buses and trains operator Go-Ahead, down 15p at 939p, from neutral to buy and added the shares to its conviction buy list.
