Bears strut their stuff as Footsie tumbles
THE ragged FTSE 100 soon found itself in the doghouse again, losing an early 98.9 point rally to end off 37.5 at 3858, its lowest since early September 1996. So the agony continues.
The City still resembles Yellowstone Park. Overweight bears continue to strut their stuff. The recent stream of accounting scandals, profit warnings and the falling dollar has shattered investor confidence close to a point of non-existence. Putting a spanner in the works were disappointing earnings announcements from US giants, Bristol-Myers Squibb, Lucent Technologies, UPS and Citigroup.
The Dow Jones Industrial Average, which on Monday closed below 8000 for the first time since October 1998, lost an early 109-point gain to trade only 36 up as punch-drunk traders in London left for home. It ended off 82.24 points or 1.1% at 7702.34. Doomsters believe Wall Street has a lot further to fall. Almost £9bn was taken out of US equity mutual funds in June and the July total is expected to be a lot worse.
Sterling recorded its biggest decline in six months against the surging dollar, falling to $1.5616 before closing at $1.566. The euro was worth 63.42p but slid back below parity against the greenback. It touched 98.97 cents before closing at 99.32 cents.
Insurers again led the retreat. Already reeling from Monday's shock profit warning from Dutch insurance giant Aegon, the sector had to stomach further bad news in the shape of a similar earnings warning from Benelux group Fortis.
Together with continuing worries about solvency levels in the sector, it sparked renewed heavy selling.
Fears that Prudential could slash its interim dividend today saw the stock sold down to 405p before it closed 36 1/2p lower at 420p. Royal & SunAlliance shed 19 3/4p to 166p and Aviva 25p to 355p.
Abbey National, which many believe is a sitting duck for a takeover following chief executive Ian Harley's departure, fell 33p to 657p. Barclays, rumoured to have mortgage bank Bradford & Bingley (6p off at 302p) on its radar screen, lost 17p to 433 1/2p.
BT Group plummeted to its worst for more than a decade as nervous investors baled out ahead of Thursday's first-quarter figures. In hefty turnover of almost 82m shares, it dropped to 206p before closing 8 1/2p cheaper at 214p. Given the weakness of equity markets, investors focus on the group's pension deficit. Under new FRS 17 accounting rules, BT has to disclose important pension statistics. At the year-end to March the deficit stood at £1.82bn.
News of another top executive's departure and disappointing second-quarter earnings figures from Bristol-Myers Squibb, the US drugmaker rumoured to be on GlaxoSmithKline's (15p cheaper at 1057p) shopping list, exerted further downward pressure on a depressed drugs sector.
Earlier, AstraZeneca collapsed 127p before recovering to finish only 19p down at 2031p. Confirmation of new clinical trials sparked early nervous selling. There are fears that further data may be required by the US Food & Drug Administration before AZN can launch Crestor, its cholesterol busting drug. AZN instructed trial investigators to reduce doses on the 80mg trials after two patients experienced kidney damage. Nevertheless, broker WestLB Panmure expects a US launch for Crestor towards the end of the year.
Supermarkets were in demand with William Morrison 6 1/2p better at 185p and J Sainsbury 10p at 310p.
Patent company BTG advanced 12 3/4p to 263 1/4p after subsidiary Provensis gained FDA approval to start the first stage of a pilot study in patients in the US with Varisolve, the non-invasive procedure being developed to treat varicose veins.
