Credit crunch ghost spooks investors

Despite some bid excitement - real and speculative - it was a fairly grim day on the markets yesterday.

Telecoms group Cable & Wireless added 3.6p to 184.4p on a revival of an old tale about a possible approach from France Télécom, while brewing group Scottish & Newcastle climbed 16.5p to 757p as Carlsberg and Heineken raised their hostile bid to 750p a share. Traders said the price would have to be closer to 850p to have a chance of a recommendation from S&N. There is still a lingering hope that SABMiller, down 43p to £13.32p might counterbid, although it gave few clues as it announced a 22% rise in first half profits.

Overall the market was still haunted by the spectre of the credit crunch, despite Barclays' attempt to draw a line under speculation about its problems with an unexpected trading update concerning its Barclays Capital business. At first it worked, with the bank's shares rising 6%. But as investors examined the details, doubts about BarCap's future performance began to grow, and Barclays ended 2.5p lower at 530.5p.

Royal Bank of Scotland dropped 18.5p to 448.5p, as investors decided not to follow director Colin Buchan, who bought 25,000 shares yesterday.

Alliance & Leicester fell another 21p to 648p, despite Wednesday's denial it had a black hole in its accounts. Rumours that HBOS was also having funding problems left it 25.5p lower at 783p. This tale seems to have stemmed from a sales presentation by HBOS to Citigroup on Wednesday. The mortgage bank repeated how difficult it was to raise money in the wholesale markets at the moment.

Another sign that the credit squeeze was far from over was a rise in the three-month Libor - the rate at which bank's lend to each other - from 6.3% to 6.3425%, a one and a half month high.

With the financial sector weak - including a 45.25p fall to 429.5p at credit information group Experian after a gloomy outlook - the FTSE 100 ended 72.5 points lower at 6359.6. Weaker than expected retail sales for October did not help matters, nor did an edgy start on Wall Street after the US Federal Reserve made its biggest temporary daily injection into the US banking system since 2001.

Caterer Compass fell 10.75p to 301.25p after disappointing figures from French rival Sodexho Alliance, while mining group Antofagasta dipped 10p to 735p even after UBS raised its recommendation from sell to neutral and its price target from 700p to 800p.

The bank said an earthquake in Chile could disrupt copper supplies, while the mining sector was likely to be supported by consolidation hopes. But it admitted: "Antofagasta, with a 65% holding by the Luksic family, is not the most likely merger candidate."

But Vedanta Resources rose 14p to £19.83 after interim profits rose 3.9% and the group gave an upbeat outlook for the second half. Cazenove repeated its outperform recommendation, saying: "The company has made the transition from a base metals focused to a diversified model for which the market has yet to accord a re-rating and has a strategic foothold in India in several key commodities [bauxite, thermal coal, iron ore]."

Energy group BG was 11.5p lower at 970.5p. But in an upbeat note, HSBC raised its target price from 705p to 780p. The bank's analysts said the positive news on its joint venture Tupi well in Brazil meant BG had exposure to a world class oil and gas discovery. "We calculate the field, which Petrobras estimates could contain an average of 6.5bn barrels of oil equivalent, could be worth 75p a share."

Property companies were unwanted after British Land, down 38.5p to 912p, said the value of its £15.9bn portfolio had fallen by 0.5% and warned of more write-offs to come.

Meanwhile Minerva - a major mover on Wednesday on stakebuilding suggestions - fell 17p to 179p. Traders were disappointed there was no mention of this in its trading update yesterday.

Fund management group New Star Asset Management lost 20.75p to 269p on talk of a forced seller in the market, while equipment hire group Ashstead fell 5.75p to 899.75p in the wake of the reported collapse of a $4bn bid for US rival United Rentals.

Financial media group Euromoney Institutional felt the wrath of investors after warning of slowing growth, and saw its shares slide 64.75p to 415p.

Still with media, Trinity Mirror also surprised the market, but this time to good effect. An unexpected trading update showed an increase in advertising revenues in the 10 months to October, and its shares added 9p to 351p.

Bookmakers Ladbrokes lost 35.5p to 344p on worries about UK trading. Lower down software group Playwize jumped 1.625p to 2.875p after announcing a deal with the betting group. Playwize is supplying the technology forLadbrokes' 3D poker game launched this week, and traders expect more deals.

Health and social care specialist Care UK fell 119p to 361p after it lost a diagnostics contract in the West Midlands, while recruitment group Greatfleet fell 16% to 3.875p after it outlined a number of problems with its accounts and said it would make a loss for the year.

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