Market report: Wednesday close

THE roof caved in on housebuilders today as investors took fright following a sales warning from

Taylor Woodrow

Taylor Woodrow cut its UK sales forecast by 6% in an otherwise inline trading statement, blaming negative media reports for the longer time it is taking punters to commit to buying a new home.

Shares in the housebuilder, which was expected to shift 10,000 homes this year, dived 8 1/2p to 235p and cast a considerable cloud over its mid-cap rivals.

Redrow fell 12 1/2p to 331 3/4p, Wilson Bowden dropped 25p to 967p, Persimmon plunged 19 1/2p to 600p and Barratt Developments slid 12p to 500 1/2p.

Figures showing mortgage demand slumped to a three-year low in September hardly helped, but analysts were quick to point out that Taylor Woodrow's problems could be company-specific. In a sell note, Arbuthnot said the company 'was one to avoid' and that others have not had such problems.

Among blue-chips, Prudential suffered another battering as the City turned on the stock after yesterday's stunning £1 billion rights issue and raised further questions about the credibility of management.

CSFB downgraded the Pru from outperform to neutral and set a new ex-rights price of 419p, while Lehman Brothers moved the group to equal weight from overweight and lowered its target from 555p to 453p.

Lehman reflected City frustration by stating it was unsure just how the vast amount of money raised through the rights issue will be deployed across the Prudential empire.

The insurance giant tumbled 7%, or 30p to 392p, as it led the FTSE 100 fallers once more, although the drop was distorted by the first day of trading in nil-paid shares.

The group's slump came as fresh concerns about corporate profitability, slowing economic growth and the buoyant oil price continued to hit confidence in London.

The FTSE 100 was down 38.8 points at 4616.4, mirroring falls in the US last night. The Dow Jones dropped 29.64 points to 9867.98 on Wall Street when it reopened this afternoon. The Nasdaq fell 0.84 points to 1922.06.

Accountancy software group Sagesaid it grew profits as expected by 20% to about £181 million in the year which ended last month. The shares rose 3/4p to 171 3/4p.

Elsewhere a host of blue-chips went ex-dividend, putting a further drag on the index. Hays fell 5 1/4p to 128 1/4p, Smiths Group dropped 21 1/2p to 741 1/2p and Norwich Union-owner Aviva eased 9 1/2p to 530 1/2p.

Struggling consumer goods group Unilever was another hit by the doom merchants after a negative note by Goldman Sachs, just days ahead of third-quarter results.

Goldman cut its rating from outperform to in-line and said the group may have to lower its guidance for 2005 early in the new year. Unilever fell 6 3/4p to 451 1/4p.

J Sainsbury fell below Monday's year-low, down 7p to 242p as investors digested yesterday's bleak strategy overview from new boss Justin King.

Autonomy slid 4p to 188p on third-quarter numbers bang in the middle of analysts' forecasts. The former FTSE 100 high-flier's shares have lost 20% of their value so far this year.

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