FTSE 100 down 5%
Monday, 29 Sep 2008 17:19
B&B: The banking crisis strike back
The FTSE 100 fell almost five per cent today as the full cost of the Bradford & Bingley nationalisation hit the City, outweighing the success of US lawmakers to hammer out the $700 billion bail-out deal.
The FTSE 100 closed down 4.97 per cent to 4,835.74 – the lowest level since the start of 2005.
Only supermarket chain Morrisons was able to record a share price gain – up 0.51 per cent to 247.25.
ICAP led the fall – dropping 23.58 per cent – after the inter-bank trade broker failed to say for the first time in seven years that its profit will beat forecasts.
Royal Bank of Scotland and HBOS dropped 18.70 per cent and 15.23 per cent as despondency become the flavour of the day for banks after the B&B bail out.
Man Group saw an 18.06 per cent fall, while miner Xstrata dropped 17.47 per cent – as commodity stocks also fell foul of the mire in the City.
On Wall Street, the down beat tone continued – with the Dow Jones dropped 2.31 per cent at 17:05 BST.
David Jones, chief market strategist at IG Index, said: "Once again the driver behind today’s action really happened over the weekend. Details were finally released for the Fed’s bail out plan, and the UK government started the ball rolling to nationalise Bradford & Bingley.
"But rather than calming the nerves of investors, this has stoked worries that there could me more casualties of the crunch still to come, and has seen the share prices of HBOS, Lloyds TSB and RBS nursing percentage losses for the day well into double digits. "
He added the reaction by the markets to the various governments’ action should not come as that big a surprise.
"The short selling bans, emergency bailouts and nationalisations at the moment look like just sticking plasters on the problem," Mr Jones said.
"Recent events would seem to confirm that markets are too big to be swayed from their path by any one organisation – whether it is government or corporate. The worry is still what is unknown and yet to come out of the financial sector – and although we have had the odd day off from this negative sentiment over recent weeks, it is still this mood that persists."