London Close: Dubai worries knock market

The London market wasn't helped by a technical glitch at the London Stock Exchange but it was never going to be a good day due to worries about the debt problems of Dubai. The fact that there was no trading for more than three hours just made investors even more nervous.

The FTSE 100 fell by more than 3%, with smaller companies also declining but not at such a rapid rate.

The market had already come in for selling ahead of the shutdown as analysts fretted over how the Dubai debt situation will affect the 20.6% stake held in the company by Borse Dubai.

The government owned Dubai World, which has debts of $59bn, has asked creditors if it can delay debt repayments due next month until May of next year. The news is a concern for banks. HSBC, Royal Bank of Scotland, Barclays, Lloyds Banking and Standard Chartered all feature prominently among the biggest fallers on Footsie.

Ironically, the London Stock Exchange was hit by the technical glitches and the fact that Borse Dubai owns 20.6% of its share capital. There are worries about what will happen to this stake.

Consulting engineers and property advisers with exposure to Dubai were hit hard. Hyder, which reported figures at the beginning of the week and was therefore in the minds of investors, was hit hardest. WSP, Scott Wilson, WS Atkins and Mouchel were also lower. Contractors Carillion and Interserve were also lower. Tool hirer Speedy Hire only moved into the Dubai market in July and its shares were sharply lower. However, Driver Group, which helps to solve construction disputes in the region was unchanged.

Nearly anything with exposure to Dubai was hit. Rolls-Royce recently won an order for 20 aircraft engines from Dubai Aerospace Enterprise and this was enough to knock 3% off its share price.

Exhibitions organiser Tarsus remained unscathed even though it owns the Dubai Airshow and other exhibitions in the country.

The water companies bucked the trend with a positive reaction to the new Ofwat regulatory framework. Ofwat said the water companies will have to cut bills in real terms between 2010 and 2015, though not by as much as it previously proposed. Ofwat said average annual bills will have to fall by £3 to £340 between 2010 and 2015, but this was less than originally indicated.

Severn Trent, United Utilities, Northumbrian Water and Pennon are all higher on the news. Utility investor Ecofin Water & Power Opportunities was initially higher but it fell back because of the international nature of its portfolio.

Currys and PC World owner DSG International was another company to buck the trend as it reported a drop in first half like for like sales but said it has seen improving trends in a number of its businesses, particularly in recent weeks. Like-for-like sales were down 4% in the 24 weeks ended 17 October, but were up 1% in the last 8 weeks of the half year.

Profits fell by nearly half at the South America-focused miner Antofagasta as tumbling metals prices hit sales. The shares trade lower, but this is not unusual in the sector today, as metal prices move lower.

Pub owner Mitchells & Butlers has made a good start to its new financial year, but worries about the strength of consumer confidence and possible tax rises after next year's General Election. Pre-tax profit fell 24% in the year ended 26 September 2009 to £134m on revenue up 2.6% to £1.96bn.

Newspaper publisher Daily Mail slumped deeper into the red last year as more write-downs knocked its figures, but underlying profits also took a tumble as its UK local papers suffered in the recession. Adjusted profits in the year to September fell by 23% to £201m on revenues of £2.1bn, down from £2.3bn.

Another 642 British jobs are to go at defence giant BAE Systems due to a drop in demand at its surveillance business. The company's Integrated System Technologies unit, a maker of radar surveillance and command systems, will cut staff at eight sites.

The Department of Transport has decided not to extend the National Express East Anglia franchise beyond its normal termination date of March 2011. National Express said it had expected the decision after it handed back control over the loss-making East Coast mainline rail franchise to the government last month.

Rail maintenance group Jarvis slumped into the red at the half year point and added it will only break-even before interest this year as spending by Network Rail continues to be sluggish.

A bumper Halloween enabled cards and gifts retailer Clinton Cards to lift like for like sales for the 16 weeks to 22 November by 3.9%, an increase on the early part of the period. Halloween went "exceptionally well", Clinton said.

International Brand Licensing was one of the best performers on the day following news that it is selling its Admiral sportswear business and becoming a medical diagnostics company.