London close: London ends with sinking feeling

17.12.2007

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There was no respite for London's blue chips with Footsie sinking again near the close as Wall St opened lower

Reports of sluggish Christmas trading are hurting the higher street, while sentiment is further eroded by the Confederation of British Industry (CBI) downgrading its outlook for UK economic growth in 2008. The business pressure group expects annual growth will hit 2% next year, down from the 2.2% predicted in September.

Household goods retailer Home Retail Group, Dixons and Curry's group DSG International and high street fashion chain Next are all doing badly.

Meanwhile, property website Rightmove says UK house prices fell 3.2% in December from the previous month, the largest drop since it began collecting the data back in January 2002. The survey, which blamed the drop partly on the winter seasonal slowdown and a rush of first-time sellers avoiding the home information packs (HIPs) legislation, showed London prices tumbled 6.8%.

Housebuilders Barratt Developments, Persimmon and Taylor Wimpey all sank on the news, as did property giants British Land, Liberty International and Land Securities. Hammerson is also lower, after UBS lowered its price target for the shopping centre owner, though it raised its recommendation to 'buy' from 'neutral'.

Mid-cap property groups took a beating on worries over the extent of the downturn in the UK commercial property sector. Minerva, Mapeley and St Modwen all fell sharply, though New Star Asset Management, which cautioned last week that its property unit trust 's net asset value had reduced by 17.8% since July, also slipped badly.

London-based property fund and asset manager Fletcher King also tumbled after warning that despite a strong first half it expects results for the full year will fall "materially short" of those achieved during 2006.

Miners also proved a major drag on weaker metal prices. Xstrata, Vedanta Resources and Kazakhmys are in a hole.

Among the banks, Lloyds TSB is weaker after Cazenove cut estimates, while HBOS went south on an HSBC 'underweight' with price target chopped to 730p from 840p.

Bright spots among the Footsie constituents were limited to perceived defensive stocks such as Imperial Tobacco and BAT or telecoms giant BT and cruises titan Carnival.

Elsewhere, stockbroker Collins Stewart holds steady on reports it has held preliminary discussions about a possible takeover by Japanese bank Nomura. The talks are not thought to be very far advanced.

Bus and rail group Arriva says it can cope with a potential rise in fuel prices and full-year results are expected to be in line with expectations. In the UK Bus division, the increase in fuel costs has been more than offset by the benefits of network development. Results for the UK Trains division will reflect expenditure on three concurrent UK franchise bid, the group said.

Online gamer 888 says trade continues in line with management's expectations, underpinned by stronger than expected current trading and it remains confident about the group's prospects for the full year.

Retail software specialist NSB has recommended a takeover offer from rival Epicor worth 38p per share, or £160m in total.

Sub-prime lender Provident Financial says it is trading well and expects to report strong profits growth for the year as a whole, in line with market expectations. The group has been able to take full advantage of current market conditions with no funding problems. Strong credit management has produced an improvement in the level of arrears, it added.

Shares in Anite dipped after the software and solutions company said it is reviewing the structure of its business. The group expects full-year results to be "broadly" in line with last year.

Software solutions provider Alphameric has called off bid talks after it failed to receive an adequate offer. The company confirmed back in October that it had received unsolicited expressions of interest from a number of third parties.

FTSE 100 - Risers

Imperial Tobacco Group (IMT) 2,619.00p +1.63%

BAE Systems (BA.) 462.00p +1.54%

Tate & Lyle (TATE) 430.25p +1.41%