Rate-Cut Hopes Help to Limit Losses on Footsie

Hopes of further US interest-rate cuts this week helped the FTSE 100 index to limit its losses yesterday in another turbulent session for investors.

The UK’s leading companies lost almost 3% at one point, after it emerged that sales of new homes in America dropped by a record 26% in 2007 amid the weakest prices for 16 years.

But, City traders then bet the gloomy data would prompt more rate cuts from the US Federal Reserve tomorrow to follow the 75 basis points reduction made by policymakers last week in an effort to avert the world’s largest economy from slipping into recession.

At the start of a second week of market turmoil, the Footsie – off more than 160 points at one stage – closed down 80.1 points at 5,788.9, a fall of 1.4%.

Among the leading victims were the heavily weighted mining stocks. Their drops came as South African power firm Eskom warned a number of miners in the country that it could not guarantee supplies because of a shortage of coal.

Anglo American was off 125p at pounds24.65 and Rio Tinto down 147p at pounds45.49. BHP Billiton, the world’s biggest miner, shed 23p at pounds13.94.

Xstrata managed to stay in the black after bid talk during the weekend and good production news from a Chilean copper mine. Its shares were up 12p to pounds35.12.

Elsewhere housebuilder Persimmon was down 4% to 790.5p, while Taylor Wimpey – exposed to the struggling American housing market – led the fallers, with a slide of 10.1p to 183.3p.

Building supply firm Wolseley, which does half of its business in the US, was off 29.5p to 700p.

The weak economic sentiment also resulted in falls for retailers J Sainsbury, down 9.5p to 375p, and B&Q owner Kingfisher, which lost 4.3p to 137.4p.

A host of banks also lost ground, including the Royal Bank of Scotland – falling 9.25p to 381.75p – and Barclays, which was off 1% at 482.5p. Lloyds TSB ended the session down 7.25p at 422p.

Among the Footsie risers was cruise ship operator Carnival, up 24p at pounds21.01. Broker Dresdner Kleinwort said good Caribbean ticket sales showed the firm’s recovery last year was continuing.

Also up thanks to the volatile market boosting business were London Stock Exchange, up 37p to pounds17.68 and inter-dealer broker Icap, which gained 9.5p to 665p.

(c) 2008 Press and Journal, The Aberdeen (UK). Provided by ProQuest Information and Learning. All rights Reserved.