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Stock-market investors were fighting a fierce rearguard action in London today in the face of massive sell-offs in Asia this morning and a wobbly start to trading on Wall Street this afternoon.
Shares in Hong Kong suffered a 2.4% decline just before the close of business, reflecting more big losses on the Chinese mainland.
In Shanghai, shares experienced their second-biggest drop of the week as punters braced themselves for a further tightening of fiscal policy.
The Shanghai Composite index tumbled 4.3% to its lowest level in almost two months. It has now fallen almost 20% since the start of the month. The biggest casualties were newly listed companies.
In June, the regulator stepped up the pace of flotations to improve China's economic and corporate structure.
Dealers complain that the Chinese government needs to make clearer its economic policy in order to halt the stock market sell-off. They also say the days of cheap money appear to be over. That should please the Americans, who have been complaining about the weak yuan, which has been making life difficult for its exporters.
In London, leading shares clawed back opening falls with the FTSE 100 index sporting a rise of 3.88 points to 4689.66 after touching a low for the day of 4625.
It was additionally weighed down by a long list of blue-chip companies going ex-dividend, which would be the equivalent of a 10-point fall. Those companies included British American Tobacco, down 30p at 1870p, after paying around 27p worth of dividend. Others making adjustments to take account of dividend payments included Scottish and Southern Energy, down 59p at 1076p, having paid 45p, Thomson Reuters, 13p cheaper at 1903p, and Pearson, publisher of Penguin books and the Financial Times, 6½p off at 706p.
Morgan Stanley remains upbeat about prospects for the London market and has been telling clients that all the signs point to scope for a further 500-points rally before it becomes fully valued. Wall Street came under further selling pressure with the Dow Jones losing 22.52 at 9195.42. In London, life assurer Legal & General moved against the trend, firming 0.85p at 70.9p in a market place short of stock. Dealers say Resolution's successful bid for Friends Provident, down 1.1p at 76.3p, has raised hopes that L&G may be next in its sights.
Drugmaker Shire fell 17p to 1020p after JPMorgan downgraded the shares from overweight to neutral.
Only yesterday, Goldman Sachs was pushing HSBC, down 15.7p at 640.3p, as the bank most likely to benefit from the economic recovery.
Today, the broking arm of state-owned Royal Bank of Scotland is putting its money on another Government-controlled bank, Lloyds Banking Group, claiming it offers a “compelling restructuring opportunity”. It has raised its rating on the shares, up 3.7p at 100.5p, from hold to buy and jacked up its target from 60p to 150p.
That compares with the 120p a share the Government paid for its 43% stake when it rescued the bank with taxpayers' money earlier this year.
Meanwhile, the murmur continues around the market place that Lloyds is still looking to press ahead with a £16 billion fundraiser designed to avoid the Government's asset protection scheme. That would be the cost of the premiums Lloyds would have to stump up to insure around £230 billion of dodgy loans.
The other banks traded mixed. Barclays lost 0.2p at 346.9p, while Royal Bank of Scotland gained 0.62p at 46.7p. A survey from the accountant KPMG suggests the retail arms of the leading banks will plunge into loss during the second half of 2009. It blames the cost of bad loans, tough competition and wholesale funding issues.
Tin-can maker and packaging giant Rexam, down 4.1p to 255.2p, says 222.5 million shares, or 95.19% of its recent rights issue, were taken up by shareholders. The rump of 11.3 million shares was placed with various institutions in the market place at 253p.
Ithaca Energy celebrated news of its first positive cash flows with a rise of 4p at 51¾p. The exploration and production company with interests in the North Sea achieved a net profit for the second quarter of $3.8 million (£2.3 million) with positive cash flow from operations totalling $16.9 million. The group said the Beatrice Alpha, Beatrice Bravo and Jacky fields together produced 673,073 barrels, of which 463,688 barrels went to Ithaca.
