Endless Bad News Leaves Investors Reeling

A continuous cocktail of bad news during the day has sent share prices tumbling once more, with the leading index falling nearly 5% and testing the 4000 level.
Almost every sector contributed to the gloom - from supposed safe havens such as drugs companies, to retailers, to banks, to miners.
Pharmaceuticals were hit by a profit warning from AstraZeneca, down 304p to 25.01, while retailers fell sharply on fears of poor Christmas trading as a host of household names - including Marks - Spencer and Debenhams - began impromptu sales. M-S closed 11.25p lower at 200p, while Debenhams dropped 4.5p to 23.75p. Meanwhile Woolworths lost 1.46p to 2.35p after confirming it was in talks to sell its struggling high street stores to restructuring specialist Hilco for a nominal 1.

Electrical retailer DSG International declined 5p to a new low of 11p, not helped by a downgrade from Citigroup which slashed its price target from 30p to 19p. Adding to the high street blues, retailers are also being hit by the growing unwillingness of insurers to provide shop suppliers with credit insurance.
HMV slipped 3.5p to 107p despite a positive note from RBS in the wake of the Woolworths news. It said:

'HMV is a possible winner of restructuring at Woolworths. While the best case for it would clearly be to see Woolworths retail collapse to fully release its entertainment market share to surviving players, the transfer of ownership to Hilco may prompt more radical action in the short term to close stores than under existing management, releasing some of that market share sooner and aiding HMV's own recovery.'

Banks were under the cosh on fears of yet more write-downs, with traders pointing out that their property portfolios were bound to have slumped in value and could be the next big problem after toxic loans.


Barclays closed 19.9p to 129.6p while Lloyds TSB lost 12.7p to 118.5p. But HBOS edged up 1.3p to 64.3p as Lloyds shareholders approved the merger of the two banks, while Royal Bank of Scotland rose 0.6p to 42.3p.
Miners fell back on demand worries, not least from China, where there are growing concerns about social unrest if the country faces a severe downturn in its economy. Kazakhmys closed 42p higher at 193p, Vedanta Resources fell 76.5p to 438p, and Lonmin lost 108.5p to 724.5p. Xstrata, which has a 24.9% stake in Lonmin bought at around 18 a share, fell 94.5p to 705.5p.


With a near 200 point drop on Wall Street by the time London closed, partly on worries about the collapse of the country's car makers, the FTSE 100 fell 202.87 points to 4005.68, a 4.82% decline and its 17th worst daily performance.
Investors were also bailing out of other consumer reliant companies, with pubs group Enterprise Inns down 20p to 64p after Dresdner cut its 2009 profit forecast by 3%.
Online gambling group PartyGaming dropped 3p to 95p as it reported flat third quarter revenues and a decline in its poker business. Evolution said:

'First half revenues were flattered by currency moves but now the second half reported numbers are suffering from the weakness of the euro and pound. On an underlying basis revenue is still growing with strong growth in casino being largely offset by weak poker. We would be more concerned if management were not working on a strategic solution to poker.

Party needs to merge its poker room with a competitor. The cash position and cash generation remains strong. The value of the free float is only slightly more than the net cash we forecast for the end of 2009 - something which is unlikely to escape the attention of the majority shareholders.'

But credit information group Experian climbed 22.75p to 329.25p after an 8% rise in first quarter earnings and massage recliner chairs a positive outlook. Cillit Bang business Reckitt Benckiser rose 14p to 27 as Citigroup began coverage with a buy rating and 30 target.
Lower down the market consumer electronics group Armour slipped 1.5p to 9p. The company, which supplies entertainment systems and in-car systems to the likes of Tesco, Comet and massage in orlando Halfords, has held up well despite the downturn, with full year profits of 3.5m, down from 4.5m. But house broker FinnCap has cut its forecast for the current year from 3.5m to 1.65m and its price target from 28p to 8p. It said: 'The shares appear compellingly cheap but in the short term it is difficult to see a catalyst for a re-rating.'
Armour hopes to win a substantial increase in business from Kesa-owned Comet in the coming weeks, and is still keeping up its new product development.

It has high hopes for a 300 speaker system designed to hold a flatscreen TV setvastly improve its sound quality. Retailers are said to be very interested in the system, which could be in the shops in the second quarter of next year.
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