The London market plunged 1.8% into the red today as fears over potential interest rate rises spooked investors on both sides of the Atlantic.
Banks, retailers and housebuilders led declines in London’s late session sell-off, which was sparked by heavy falls in the US after oil prices rebounded, raising concerns that soaring inflation may see central banks increase interest rates.
The FTSE 100 Index closed down 104 points at 5723.3, while on Wall Street, the Dow Jones Industrial Average was more than 160 points down in early trade.
Banks tumbled amid the market woes in London, led by Halifax bank of Scotland, down 12%, or 34p, at 258p – below the group’s 275p discounted rights issue offer price.
HBOS issued a statement confirming that the £4 billion cash-call to investors was still on track despite the share price blow, which now leaves a question mark hanging over the level of investor appetite for shares in the rights issue.
Alliance & Leicester was another heavy faller, off 29.25p at 318.75p. The bank was confirmed as one of those to be ejected from the top tier next week, having seen shares fall to a fraction of their former levels in recent months.
Royal Bank of Scotland also featured high up on the fallers board, down 21p at 212.25p.
It was another disastrous day for housebuilders, with four of the UK’s biggest firms suffering double-digit percentage falls after another round of sell recommendations from brokers.
Charles Church owner Persimmon was down nearly 3%, or 11.5p to 376p. Its price at the close of trading on Tuesday had already ensured its relegation to the FTSE 250 Index in the latest quarterly reshuffle.
Investors were further spooked today when Merrill Lynch downgraded six housebuilders, echoing concerns issued by Goldman Sachs and Dresdner Kleinwort analysts earlier in the week week.
Second tier rivals Barratt Developments and Taylor Wimpey again took the brunt of the sell-off amid fears the pair will have to turn to shareholders for a cash boost. Barratt was down another 21% – or 19p to 72.5p, despite reassurances over trading. Taylor Wimpey eased 12.5p to 52.5p and Redrow fell 31.25p to 134.25p.
Amid the house price gloom, building supplies giant Wolseley was a leading faller, losing 24.25p to 465p.
Warnings from Citigroup of weak consumer demand this year and next saw retailers come under pressure.
Next fell 81p to 1016p in the top flight, while in the second tier, Comet owner Kesa Electricals was down 10%, or 19.25p to 170.5p. Fellow FTSE 250 firm DSG International, which owns Currys, was 8.5p worse off at 49.25p and Debenhams was 3.25p lower at 53.75p.
On the positive side, BP and Royal Dutch Shell made gains as oil prices crept back up past the 134 US dollars a barrel mark. The firms were up 8.75p to 591.75p and 11p to 2059p respectively.
The biggest Footsie risers were Capita Group up 20.5p at 704.5p, Centrica ahead 8.75p at 305p, FirstGroup up 12.5p at 515.5p and Amec up 19.5p at 914p.
The biggest Footsie fallers were HBOS down 34p at 258p, Royal Bank of Scotland down 21p at 212.25p, Alliance & Leicester off 29.25p at 318.75p and Next down 81p at 1016p.