£50bn cash boost can't reverse FTSE's downward spiral

Published on Wednesday 8 October 2008 21:19

LONDON FTSE 100 CLOSE 4,366.7 -238.5

ANOTHER rollercoaster session, another multi-billion-pound wipe-out. Despite confirmation of a 50 billion taxpayer injection for struggling banks and co-ordinated interest rate cuts from global central banks, the London market tumbled to a fresh four-year close.

The rate cuts briefly hauled the benchmark FTSE 100 into positive territory, but jitters resurfaced once again, and the index closed down 5.2 per cent, or 238.5 points, at 4,366.7, its lowest close since August 2004.

The Footsie has lost 12.3 percent so far this week and is on track for its biggest weekly fall since the crash of 1987, having shed 32.4 per cent in the year to date.

Just eight top-flight stocks closed in the black after see-saw swings, with HBOS and Royal Bank of Scotland the two banks better off. HBOS shares added 23p to 117p as investors speculated that its takeover by Lloyds TSB will survive following the initiative. Royal Bank of Scotland, which plunged nearly 40 per cent on Tuesday, hardly made progress, rising just 0.7p to 90.7p after being much higher earlier in the day.

CMC Markets dealer Jimmy Yates said: "(Today's interbank lending] rate will be closely watched to see if this latest action will help free up credit markets but the Bank of England have said quite openly that a more accommodative monetary policy alone isn't a solution.

"For the time being, however, any improvement in projections for corporate performance are going to remain limited."

In volatile trading as investors digested the banking rescue package, Barclays ended up falling 35.75p to 278.25p, with Lloyds TSB down 7 per cent, or 15.5p, to 210p.

Other banks fared poorly amid uncertainty about their level of exposure to the government's proposals, in particular any dilution threat to existing stakes and possible curbs on future dividend payments.

Standard Chartered, which has no plans to issue any new capital, fell 151p to 1,160p while HSBC was off 22.75p at 878.25p.

Despite the rate cut, supermarket Sainsbury's was the Footsie's biggest casualty, down 15 per cent, or 47p, to 267.75p.

The fall came amid speculation, later confirmed, that investor Robert Tchenguiz has offloaded his 10 per cent stake in the group. Analysts also feared its like-for-like sales jump of 4.3 per cent for the 16 weeks to 4 October, which was slightly better than market expectations, could be hard to beat.

Sentiment was not helped by a forecast for negative growth next year for the UK economy from the IMF, and growth warnings from the Bank of England despite the interest rate cut.

Hopes for a revival in the house market saw housebuilders featuring high up the FTSE 250 index gainers' board. Bellway was 56.75p higher at 540p, while Charles Church owner Persimmon leapt 28p to 400.75p. Debt-laden Barratt was not so fortunate, slipping 1.25p to 91.75p.