Around £1.2bn (€1.78bn) was wiped from BAE Systems shares today after the defence giant said it faced an anti-corruption probe by the US Department of Justice.
The launch of the investigation into the company’s dealings in Saudi Arabia caused the blue-chip stock to close 34.5p lower at 407.5p – a drop of 8%, although this peaked at 11% earlier in the session.
The decline for the firm, which has denied any wrongdoing, came alongside losses for the wider London market after the FTSE 100 Index eased 29.1 points to 6559.3 by the close.
Even though New York opened in positive territory, European investors failed to recover from earlier nerves about the state of the subprime mortgage market in the US, dragging the majority of banking stocks into the red.
The financial sector was also being driven by developments surrounding the takeover battle for Dutch bank ABN Amro.
Barclays’ hopes received a boost when a senior legal official in the Netherlands said the separate sale of ABN’s US unit LaSalle did not require shareholder approval.
That knocked a rival consortium led by Royal Bank of Scotland, but share prices took the opposite view, with Barclays down 9.5p to 710.5p amid concerns about the cost and risk of an ABN Amro bid. Royal Bank of Scotland rose 1p to 641p.
Some of the market’s safer stocks proved attractive for investors, with tobacco company British American up 47p to 1699p and Tate & Lyle ahead 11.5p at 584p.
Telecoms stocks also did well, with Vodafone 2.4p ahead at 160p after reports that the shareholder activist group, Efficient Capital Structures, was again pressing its case for a spin off of the company’s stake in US business Verizon Wireless. BT was ahead 5.5p at 320.75p.
Credit checking and price comparison firm Experian was also higher after announcing a deal to buy a 65% stake in a Brazilian firm for around £600m (€890.7m). Shares were up 11p at 600p as the move gave Experian exposure to one of the world’s biggest credit reference markets.
In the second tier, Carpetright shares were down 13p at 1222p, as the floor coverings firm detailed difficult trading conditions in the wake of recent interest rate hikes.
Engineering firm WS Atkins was another faller, down 3% – or 35p – to 1095p after the company said it had booked a £121.3m (€180m) loss from exposure to London Underground upgrade consortium Metronet, despite strong underlying results.
But fellow Metronet firm Balfour Beatty enjoyed better fortunes even after booking £100 million losses from the venture. The builder was up 1.75p to 443p, after it said it had experienced a stronger than expected start to the year.
The biggest Footsie risers were British American Tobacco up 47p at 1699p, Tate & Lyle ahead 11.5p at 584p, Experian up 11p at 600p and BT Group ahead 5.5p at 320.75p.
The biggest fallers were BAE Systems down 34.5p at 407.75p, Rolls-Royce off 13.5p at 532.5p, Schroders down 31p at 1295p and Tesco off 9.25p at 426.25p.