FTSE slumps to levels not seen since 2003
HSBC led the FTSE 100 index to a six-year low on Monday amid another global sell-off
The FTSE 100 index shed 204.26 points to end the day at 3,625.83—levels not seen since early 2003 and a long way off the psychological 4,000-point mark that optimists had been hoping could be breached again this week. Even when the enormity of the impact of the credit crunch on the financial sector first took hold in 2008, the FTSE 100 still didn’t fall below 3,780 points. The FTSE 250 index ended Monday’s session off 3.1% or 188.68 points at 5,860.46.
Wall Street was a further drag on London markets in late UK deals as the Dow Jones Industrial Average fell below 7,000 points for the first time since 1997 as legendary investor Warren Buffet said the nation’s economy is in “shambles”.
Back in the UK, market analyst Ryan Kneale at www.BetsForTraders.com commented: "Everywhere you look share prices are collapsing, as corporate profits plunge and the global recession continues to bite down even harder. The major indices are really struggling as bad news just seems to be following bad news, leaving us wondering when it will all end."
Back in the UK, HSBC, widely seen as the safer option among the UK-listed banks, slumped almost 19% after saying it regrets its decision to move into US consumer finance and will be winding down its business there, leading to a US$10.6 billion write-down, which led to net profit dropping 70% in 2008 and is partly responsible for the bank’s move to raise £12.5 billion from shareholders.
The 5-for-12 rights issue is the largest on record and will strengthen HSBC’s core equity Tier 1 ratio to 8.5% and its Tier 1 ratio to 9.8% on a pro forma basis. Analysts largely welcomed the move but the news sent shares in the group reeling, closing down 92.25p at 399p. Lloyds Banking Group followed, losing 15.3% to 49.4p and Standard Chartered, which will announce its own results later this week, dropped 11.6% to 587p.
Banks weren’t the only culprits: insurers suffered further losses after US giant American International Group (AIG) confirmed it will hand over control of two of its key divisions to the US government in return for a US$30 billion bail-out.
Insurers Legal & General and Aviva were amongst the worst hit in the UK, losing 9.7% to 36.3p and 7.4% to 267.5p, respectively.
Commodity plays were also under the cosh, led by Xstrata, down 13.5% at 601.5p after shareholders approved the Anglo-Swiss miner’s £4.1 billion rights issue, Anglo American, off 8.7% at 914p and Eurasian Natural Resources, 6.7% behind at 311p. Commodities prices headed south on Monday, with gold continuing its retreat from recent US$1,000 per troy ounce levels and oil sliding US$4 per barrel to US$40.7. Oil heavyweight BP fell back 5.7% at 422.75p and Royal Dutch Shell eased 5.2% to 1,407p.
Among the few gainers, Admiral led the way with a 2.3% rise to 875p ahead of its full-year results tomorrow, which are expected to include an increase in pretax profits, while Amlin ticked up 2.3% at 350.75p after its own full-year figures pleased. Pearson was another outperformer, slipping just 0.9% to 653.5p in closing deals after posting better-than-expected numbers for 2008 and a cautiously optimistic-sounding outlook.
