Market Wrap, Tuesday 19th August 2008

The FTSE 100 closed down 129.8 points at 5,320.4 today, which looked on the cards once yesterday’s Wall Street news was digested, with the financial sector taking a hit. The FTSE 250 closed down a heavy 256.4 points at 8,967.6, with the poor old housebuilders taking the hits there.

Over the pond, by the time London closed the DJI was down about 125 points at 11,354, whilst the S&P500 was down 12 points at 1,267, and the Nasdaq down over 22 points at 2,394. News from the US government that wholesale level inflation has risen at the fastest speed in 30 years was received with open mouths. Core inflation, which does not take in to account food and energy costs, was up 1.2% last month, on top of the 1.8% in June. Then the Commerce Department said that housebuilding was at its lowest level for 17 years in July, just incase any more doom and gloom was needed. An annual rate of 965k units were being started, compared to 1.08m in June. What with the possible US government bail out of mortgage giants Fannie Mae and Freddie Mac still ringing in investors’ ears from yesterday, it was inevitable that Wall Street would take a hit and that London would follow some more. Don’t forget, as we mentioned this morning, rumours that Lehman Brothers would be posting some rather concerning 3rd quarter numbers also had the banks reeling. Then we had the Kenneth Rogoff comments. He is the ex-IMF chief economist that people take notice of, especially when he says that one of the largest US major banks will be going to the wall in the next 3 months. This implies that he knows more, and has informers where it matters.

Back here in London, it was the financial sector that was blooded. Obviously. HBOS closed down 22p at 277.5p, also hindered by a WestLB downgrade to ‘add’ from ‘buy’, whilst RBS closed down 13.5p at 215p, Barclays down 18.5p at just over 324p, Standard Chartered down 87p at 1,326, and Lloyds TSB closing down almost 18p at just over 288p.

The insurance guys also carried on from this morning, downwards, with Aviva closing down nearly 29p at jusrt shy of 496p, the Pru off 30.5p at 519.5p, and Legal & General down 6.4p to close at 96.7p.

Finding something postive was difficult, but medical supplier Smith & Nephew had a fairly good day, closing up 13.5p at 632p as investors moved in seeing a safe stock, but also helped by rumours of a US firm Zimmer Holdings were sniffing with intent to bid.

Other safety was found in energy, where Scottish & Southern Energy closed up 14p at 1,453p, United Utilities up 4.5p at 709.5p, and National Grid closed up 2p at 710p.

On to mining, briefly, where Xstrata closed up 52p at 2,871 after deciding it needed to announce that it reckons market conditions will improve towards the year’s end.

On to housing related movements, where the main FTSE faller today was the heavily US exposed Wolseley, the building materials supplier, that closed down almost 37p at 389.5p. That’s over 8.5% fall in one day. Those US house build figures did the damage, one can confidently assume.

On to the housebuilders themselves, where Persimmons closed down 27p at 305p, Taylor Wimpey down 4.5p at 42.25p, and Barratts down over 11p at 118p. All following the sector trend.

Staying in property, Real Estate Investment Trust (REIT) Brixton closed down 23p at just shy of 225p after poor interims were announced, which we explained in detail this morning. Merrills reiterated its ‘underperform’ stance on Brixton.

Another positive note - Oil services group Wellstream closed up 70p at 1,110p after announcing a £600m deal with Petroleo Brasileiro.

As also mentioned this morning, Punch Taverns received a JP Morgan downgrade, closing down 26p at just shy of 227p, and peer Marston’s received the same JP Morgan treatment, closing down 11.5p at 194.25p as a result. Mitchells & Butlers fell in synpathy, down 17p at 272.25p.

Lloyd’s insurer Hiscox closed up 2.5p at just over 227p as inevstors studied the interims announced yesterday and saw more value.