FTSE slides after sentiment turns sour

British Land bucked the trend as the London market failed to keep early gains.

Shares in the property company advanced 5.2 per cent to 968p after Morgan Stanley (AMEX:MWD) upgraded the stock along with Segro, up 5.4 per cent to 499p and Brixton, 5.9 per cent higher at 323¾p, in a sector review.

"We expect UK property to climb by at least 20 per cent in the first six months of 2008 as the Bank of England is forced to cut UK base rates by around 100 basis points in an attempt to avert a recession," analyst Martin Allen said.

However, Mr Allen warned that once the rally ran its course, the UK property sector could halve in value in the following 18 months.

In the wider market, it was another depressing session, after US bank Merrill Lynch announced a bigger-than-feared subprime-related writedown.

The FTSE 100, which recrossed the 6,000 level in morning trading, eventually closed 40.5 points, or 0.7 per cent, lower at 5,902.4. It was dragged down by another poor performance from the mining sector. Worries that a recession in the US would affect demand for metals saw Vedanta Resources fall 6.6 per cent to £17.60, while Kazakhmys shed 5.2 per cent to £11.31, and Xstrata lost 4 per cent to £30.97.

On a brighter note, Scottish & Newcastle rose 5.4 per cent to 765p after the brewer confirmed reports on FT Alphaville that it would talk to unsolicited suitors Carlsberg and Heineken about a potential offer priced at the 800p a share level that S&N had set for talks. Associated British Foodsjumped 8.1 per cent to 838p as short sellers bought back positions after a better than expected trading statement.

Marks & Spencer advanced 3.2 per cent to 399¼p after Martha Lane Fox, a non-executive director, bought 13,000 shares at 395p.

In the insurance sector, Prudential eased 1.3 per cent to 633½p on rumours that results were being guided lower, while Legal & General improved 0.6 per cent to 128p after Andrew Crean, Citigroup's insurance analyst, reiterated his "buy" rating and 155p target price.

British Energy drifted 3.6 per cent lower to 520p on worries that a £9bn windfall tax could be slapped on UK utility companies.