Financial stocks take a hammering

Jan 19 2008 by Peter McCusker, The Journal

THE FTSE 100 yesterday lost 0.7 points to close in negative territory and perpetuate its sustained southward slide of recent sessions. The index close of 5901.7 represented a late-in-the-day collapse after the index had been up for most of the day.

The biggest climbers on the day were the previously much-maligned retailers and also the mining sector as takeover speculation drifted across the market prompting strong increases in the share prices.

The vanguard of high street gains was Marks & Spencer which, following rumours of stake building by fashion guru Philip Green, jumped 3.82% to close at 414.75p – an increase of 15.2p. Green, who currently owns Arcadia – a group which includes Topshop, had a bid for Marks & Spencer beaten away in 2004 and much of the early trading rumours suggested that he was positioning himself for a second attempt. Although later updates denied the approach many analysts took the opportunity to remark upon the eligibility of M&S as a target and speculated that even if Mr Green’s bid didn’t materialise the retailer still represented a likely prey for other groups.

Other speculation involved the possible conclusion of BHP Billiton’s protracted acquisition of Rio Tinto with talk of a sweetener to the outstanding offer the Rio board rejected on November 8. BHP has until the February 6 to exact their takeover before the UK Takeover Panel bans any further approaches for six months.

Rio Climbed 221p to 4701p while BHP jumped a more modest 29p to 1377p.

The biggest losers on the day were banks and financial stocks which took a collective hammering and which saw Standard Life close 12.5p down at 213.5p, Prudential dipped 37p to 596.5p, Old Mutual slid 6.3p to 139.8p, while Aviva fell 4.22% to 579p – a decrease of 25.5p.

Ian McElroy Investment Manager Barclays Wealth