London shares tumble in afternoon deals as sliding Wall St adds to problems

London shares tumble in afternoon deals as sliding Wall St adds to problems

	Published : Tue, 27 Feb 2007 16:44 By : Agencies Print this Story

LONDON (AFX) - UK blue-chips slumped over 2.5 pct in midafternoon deals, as disappointing US economic data and a subsequent early tumble by Wall Street added to the market's mounting problems, dealers said.

Commodity stocks bore the brunt of the heavy selling amid concerns over slowing growth in China and tax in South Africa, they added.

By 3.05 pm, the FTSE 100 index was down 156.60 points at 6,278.10, its lowest levels for four weeks, while the broader indices were also sharply lower, with the FTSE 250 down over 3 pct, or 386.70 points to 11,225.70.

Wall Street fell sharply in early trading, joining a global stock decline on growing concerns about slowing economies in the US and China, with worries that US stocks are about to embark on a major correction feeding the drop, traders said.

Durable goods orders in January dropped by the largest amount in three months, exacerbating concerns about the US economy, as did a Standard & Poor's index showing single-family home prices across the nation were flat in December.

The disappointing data hit an already jittery market following a warning from former Federal Reserve Chairman Alan Greenspan yesterday that the US economy may be headed for a recession.

Geopolitical issues also played a part, with a suicide bomb attack on the main US military base in Afghanistan where Vice President Dick Cheney was visiting.

The DJIA was down 138.50 points at 12,493.80, while the Nasdaq was off 48.77 points at 2,455.75.

In London, UK listed mining stocks remained sharply lower in midafternoon deals, accounting for 8 of the top 10 FTSE 100 fallers, as concerns over slowing economic growth in China and a windfall tax levy in South Africa combined to batter the sector.

Chinese stocks fell by almost 9 pct overnight, their biggest one-day drop for over 10 years, with rumours of rate hikes, taxation restructuring and share trading probes all sweeping the market and spooking investors.

Miners were also knocked by news that a task team set up by South African Finance Minister Trevor Manuel has recommended the issue of proposed windfall tax for the resources industry, which may be earning excessive profits.

Xstrata was down 169 pence at 2,486, Anglo American shares were down 153 pence at 2,477, Antofagasta was 37 pence lower at 464-1/2, BHP Billiton down 67 pence at 1,053, Kazakhmys off 68 pence at 1,127, Rio Tinto down 137 pence at 2,803, Lonmin down 194 pence at 3,180 and Vedanta down 61 pence at 1,280.

Meanwhile, oil stocks were also lower, caught up in the general commodities sell-off. BP fell 11-1/2 pence to 533-1/2, BG was 12-1/2 lower at 717-1/2, Royal Dutch Shell B shares fell back 14 at 1,695 while Cairn Energy dropped 45 pence to 1,586.

In financials, Standard Chartered fell 56 at 1,453, dragged down by overnight weakness in Asia, despite delivering a 19 pct increase in full-year profit, in line with market expectations.

Standard Chartered, which is listed in London but generates over two-thirds of its revenues in Asia, said pretax profit for the year to Dec 31 2006 came in at 3.178 bln usd, up from 2.681 bln usd the previous year.

Analysts had expected profit of 3.168 bln usd, according to a consensus forecast supplied by the company.

In reaction, Dresdner Kleinwort repeated its are duce' recommendation and 1,250 pence target, arguing that the issue is not 2006/07 earnings, but 'rather the slowdown expected in 2008 when wholesale bad debts normalise.'

Overall, the broker told clients that while the results were 'ok', trading at 14.3 times 2008 underlying EPS, the valuation is 'still excessive'.

The news sent peers Barclays 25 lower at 764-1/2, Royal Bank of Scotland lost 39 at 2,064-1/2, HSBC was off 6-1/2 at 897 and Lloyds TSB fell 7-1/2 at 584.

Defence groups were also under pressure after today's Times reported the Treasury is threatening to cut defence projects worth up to 35 bln usd in the Governments next spending round.

In response, BAE Systems lost 16 at 444-3/4, and Rolls-Royce fell 16 at 499, while mid-cap peers Qinetiq eased 5-1/4 at 192-1/4, Cobham was down 5-1/2 at 200-1/2, Meggitt was off 11-3/4 at 337-1/2 and Chemring slid 21 at 1,789.

The only FTSE 100 riser was Reuters, adding 3 at 435 after the news provider was upgraded to 'outperform' from 'neutral' by Credit Suisse head of full-year results this Thursday.

In a note to clients, the broker said the upgrade reflects the group's favourable revenue outlook for 2007 and the potential for share buyback extensions to enhance EPS by 1-5 pct.

On the second-line, Avis Europe slumped by more than 15 pct or 14-1/2 pence to 71, after the car rental group's full-year profit fell by almost 50 pct and warned its 2005 guidance for margin improvement is no longer sustainable.

This morning, the company posted a pretax profit of 10.7 mln eur for the year ended Dec 31, compared with 20.1 mln eur last year, although underlying pretax profit rose to 38.9 mln eur compared with 37.8 mln.

Still in earnings, Ashmore Group lost 12 at 275-1/4 after slightly higher pretax profits at the specialist emerging markets asset manager failed to inspire.

This morning, the group said interim pretax profit was 60.2 mln stg, up from 59.0 mln stg last year but total revenue was flat at 73.9 mln stg compared with 73.7 mln stg a year earlier.

Meanwhile, Partygaming was also lower, down 3-3/4 at 36-1/2 on news online gaming peer 888's non-executive director and former chief executive, John Anderson, has been asked to attend an interview with French authorities.

The company also said it is in consultation with its legal advisers with regards to this inquiry.

888 Holdings lost 9-3/4 pence to 100.

Elsewhere, Rathbone Brothers fell back ahead of the group announcing its 2006 results, with Altium Securities downgrading to 'hold' from 'add' with an unchanged price target of 1,250 pence.

Shares lost 38 at 1,195.

In contrast, GKN topped the FTSE 250 leaders board following solid full-year results from the automotive products group, prompting Cazenove to upgrade its stance to 'outperform' from 'in-line'

Earlier today, GKN posted a 9 pct rise in full-year pretax profits, excluding exceptionals and amortisation to 221 mln stg.

Shares took on 30-1/4 or 9.4 pct at 351-1/4.

Elsewhere, Bodycote International were 3-1/2 higher at 266-3/4 after well received results, with Merrill Lynch reiterating its 'buy' stance and fair value and price target of 275 pence.

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