UK stocks fall on military strikes, Railtrack woes

London, Oct 8: Britain'ss leading stocks fell 2 per cent on Monday morning, led lower by weak transport and banking stocks after US-led military strikes against Taliban targets in Afghanistan on Sunday unsettled investors.

News that railway operator Railtrack had gone into administration and the shares had been suspended hit confidence in transportation stocks.

"Clearly when you have the failure of a former FTSE 100 company and the start of a conflict that looks like it could develop into a long one there’s inevitably going to be some weakness," one analyst said.
By 0840 GMT the FTSE 100 was down 100.2 points at 4935.8. The index fell as low as 4902.7, pulling back from Friday’s close of 5036.0 points, which was its highest close for three weeks.

The FTSE 100 last week returned to its level before the September 11 attacks on the US, but analysts said the military action had added to fragile confidence in the recovery.

The US-led bombing raids caused deaths in the capital of Kabul, residents reported. President Bush vowed attacks would go on until those suspected of suicide aircraft attacks on America were driven into the open.

"One could argue that a retracement of the last couple of weeks’ gains was highly overdue anyway, and this may very well be the catalyst," said Tom Houggard at bookmakers Financial Spreads.

A decline by US stock futures contracts in Europe offset a solid close by major US indices on Friday, as it raised the prospect of a negative opening on Wall Street. The S&P 500 December futures contract was down 11.8 points at 1064.0.

Transport derailed by Railtrack
Transportation stocks fell after news that Railtrack, the owner and operator of the country’s creaking rail network, had been put into administration after the government turned down its latest request for state aid. Shares in the company have been suspended at Friday’s closing price of 280 pence.

Dealers said the suddenness of the government’s action was a surprise and had angered Railtrack investors and other market observers.

"The whole episode has left a nasty taste in people’s mouths," one dealer said.

"This is incredible, and all a bit strange. The market has been annoyed by the government’s action," another dealer said.

Shares in Stagecoach Group fell 4.9 per cent, FirstGroup was down 7.8 per cent, Go Ahead was down 4.9 per cent, National Express was down 3 per cent. Airports operator BAA fell in sympathy, and was down 4.8 per cent.

Airline British Airways remained weak amid fears about passenger and debt levels in the airline industry, and its shares fell 5.2 per cent to 147P.

Invensys bucks weak trend
Banks fell in early trading. The heavyweight sector knocked 34 points off the FTSE 100, led by a 3.7 per cent fall in HSBC, a 3.7 per cent drop by Royal Bank of Scotland and a 4.6 per cent fall by Abbey National.

Telecoms, oil and pharmaceuticals stocks were also all weaker in the broad-based decline.

Engineering and electronics firm Invensys Plc was one of only six FTSE 100 stocks to rise, after it said its first-half operating profits were in line with a profit warning it gave in July.

Invensys shares were up 5 pence, or 11.4 per cent, at 49P.
Boosey rally Shares in musical instruments maker and publisher Boosey & Hawkes Plc bucked the negative opening and leapt 52.2 per cent to 54P after the company confirmed it had received a bid approach.

The Sunday Telegraph said private equity firm Graphite Capital and the Music Sales Group were planning a 50-million pound offer for the company.

But FTSE 250 industrial plant-hire firm Ashtead Group Plc dipped 4 per cent after it said its sales rose 14 per cent in the five months ended September 30, but that it was cautious as it entered its "more seasonal second half".

Telecoms equipment company Marconi fell 15.3 per cent to 15-1/4P After newspapers reported it could lose more than 210 million pounds from an unsuccessful hedging operation.

Mother and baby products retailer Mothercare also declined 4.4 per cent, despite reporting a 7.6 per cent rise in like-for-like sales for the 26 weeks ended September 28 on Monday and said margins had improved by 2.1 per centage points.

— Reuters