Weakness induces heavy falls

A return of the widespread weakness across Far Eastern stock markets, in the wake of another limit-down slide in the South Korean currency, induced heavy falls across global markets, with London no exception.

The list of big losses across the Far Eastern indices made grim reading for investors, with Malaysia taking the biggest hit, sliding 7.4 per cent, followed by Tokyo, down 5.6 per cent, Hong Kong, down 5.5 per cent, and Tokyo, down 2.6 per cent.

Far-East linked companies took a pounding with Schroders down 50p to £18.35, HSBC down 84p to £15.36, was also licking its wounds and Standard Chartered retreated 27p to 698p.

The Far East losses, coming on top of a badly dented Wall Street performance, where the Dow Jones Industrial Average dipped almost 1 per cent, pulled the rug from underneath a London equity market already struggling after two sessions of weakness.

Burdened by the predictably large falls in the banks sensitive to the Asian region, the FTSE-100 index finished an uncomfortable trading session a further 94.8 down at 5,035.9, having tumbled back below 5,000 only minutes after the opening.

It was then that the index and the rest of the market was seen as being at its most vulnerable, with a lack of commercial bids and offers being offered up to the electronic order book producing an initial steep fall in the Footsie. The index dropped 131.1 to 4,999.6 as those early prices were fed into the system.

The index regained around half of those early losses by mid-morning, but sagged again over lunchtime as the market correctly anticipated another weak opening by Wall Street. The sell-off in the US subsequently gathered momentum, the Dow posting a 150-point fall not long after London closed.

After-hours trading in the Footsie future saw the derivative drop below 5,000.

US Treasury bonds moved up a point on the latest economic news from the US retail sales for November and the weekly jobless claims figures and helped gilts and trigger a brief early afternoon rally in stocks.

Other FTSE indices also suffered, the FTSE Mid-250 finishing the day 15.5 off 4,753.8 and the SmallCap 6.3 down at 2,298.8.

Senior dealers said the market had become increasingly unsettled by events in the Asian market; "My gut feeling is that this could be the perfect buying opportunity, but the Far East doesn't seem to have sorted itself out yet and until it does we'll be vulnerable," said the head trader at one European house.

Another insisted there had been no significant selling by the institutions but he warned that any big fall on Wall Street "will inevitably impact on London".

There were glimmers of light for British stocks with two more bid stories emerging; Triplex Lloyd attracted a bid approach as did Plasmec.

Another story doing the rounds was that South West Water was lining up an offer for Shanks & McEwan, the waste disposal group, whose shares have moved up strongly in recent sessions.

Building materials group Blue Circle, engineers TI Group and materials supplier RMC which all face relegation from the top 100 to the FTSE250.

Blue Circle recovered from a 6p fall to be unchanged at 325p, TI slipped 15 1/2p to 498p and RMC plunged 7p to 903p.

Telecoms group Ionica fell to a new all-time low of 97 1/2p, 5p down, after news the group would drop out of the FTSE-Mid 250 Index.

Racal Electronics unveiled a major shake-up of its operations plans to float off its telecoms division and to sell its data communications business.

This came after the group reported a large fall in its half-year pre-tax profit to £9.2 million from £21.2 million, leaving it 14p stronger to 234 1/2p.