Buy on the rumour, sell on the fact, they say. And the old adage came into play again after Barack Obama's resounding victory in the US election.
After six straight days of gains it is probably no surprise that investors have decided to cash in some of their profits. And perhaps after the euphoria surrounding Obama has died down, the reality of recession is sinking in once more. So the FTSE 100 is now down 101.73 points at 4537.77.
Miners are, once again a heavy influence. With copper and other base metals edging down again, most of the top ten fallers in the FTSE 100 are commodity companies. Eurasian Natural Resources Corporation is down 27.5p to 380.5p, Vedanta Resources has fallen 71p to 928.5p, and Rio Tinto is 164p lower at £29.71.
Pharmaceutical groups are lower, on concerns that the new US Democratic government might implement reforms of the healthcare system. GlaxoSmithKline is down 61p to £11.85p, although Obama probably has more important things to deal with immediately, notably the credit crunch.
Banks, however, are heading higher in anticipation of a hefty UK interest rate cut tomorrow. Lloyds TSB is 5.25p better at 215.25p, Barclays is up 3.5p to 189.4p, and Royal Bank of Scotland is 0.8p higher at 66p. An exception is Allied Irish Bank, which has fallen 6% to €3.8 after cutting its full year earnings forecast and cancelling its 2008 dividend.
Transport stocks have been lifted by news of a 44% rise in interim profits at bus and train operator FirstGroup, up 1p at 446.25p. Stagecoach, hit yesterday on recessionary fears, is up 1.2p at 185.4p, reassured by FirstGroup saying its second half had started well.
In a buy note on FirstGroup, Panmure Gordon said:
"In today's uncertain environment, we believe bus and rail stocks provide an attractive combination of defensiveness, good growth and attractive dividend yields. Even though FirstGroup is not immune to an economic slowdown, it is important to remember that it has a well balanced portfolio with about 50% of its revenues secured under medium term contracts."
Investec was also positive:
"Interims are slightly ahead of our estimates and all parts of the business are performing well. Synergies are being realised earlier than expected and First has made good progress on refinancing, with just $300m of its 2010 term loan now outstanding. We see clear value in First given its defensive earnings profile with an emphasis on US school buses and potential for synergy-related upgrades. We retain our buy recommendation and 445p target price."
