How we stand after great Greenspan stir

TODAY marks the sixth anniversary of US Federal Reserve chairman Alan Greenspan's "irrational exuberance" speech which caused a big stir in financial markets on both sides of the Atlantic.

It remains etched on the minds of many City traders and investors, but makes interesting comparisons with the state of play in today's markets.

Around the time Greenspan made his Washington speech, base rates here stood two percentage points higher at 6%, the pound was trading at $1.69 - its highest for four years - and inflation had surged to 3.3%. Financial markets were booming. Wall Street was trading at a record high of 4000, but has since more than doubled.

The Hang Seng in Hong Kong stood at 13,239, compared with the current level of 10,000. The FTSE 100 index, however, traded at 3963, just 126 points below today's level. Dealers say it suggests share values in the US may have further to fall before the recovery kicks

It was the turn of life assurer and stock market investor Friends Provident to take a bashing in the financial sector today with the price sliding 93/4p, or almost 7%, to 1301/2p. The group is to raise pounds 180 million by way of a convertible bond, due 2007, and yielding between 5.25% and 5.75%. Finance director Martin Jackson said: "This further strengthens the group's financial position and enables it to take advantage of future growth opportunities."

Life assurers have been under the cosh after seeing the value of investment portfolios dive along with the stock market. This has put their solvency ratios under pressure and forced some to pump in more money.

The City took news of FP's bond issue badly. It is convertible into ordinary shares and would dilute existing shareholders. Credit rating agency Moody's downgraded the group's status last night, making it more expensive to raise extra funds in future. The rest of the market traded below its best levels with Wall Street continuing to lose ground in early trading this afternoon. The decision of the Bank of England's monetary policy committee to peg interest rates as the European Central Bank cut by half-a-point was in line with City expectations. The FTSE 100 Index rose 9.4 to 4058.0.

The breakdown of bid talks at debt-laden casinos operator London Clubs International left it nursing a fall of 2p to 223/4p. LCI confirmed it had received an offer of 25p a share from rival Stanley Leisure, 61/2p cheaper at 4031/2p. But the offer was subject to a "long and unacceptable list" of preconditions that included LCI's banks agreeing to redeem their debt at a discount to face value. Publisher Reed Elsevier is confident of achieving double digit earnings growth this year and next, and its shares rose 11p to 546p.

By contrast, the outlook for pubs and hotels giant Six Continents, down 6p at 539p, is gloomy. Pre-tax profits last year fell 24% to pounds 558 million and chief executive Tim Clarke said trading in its hotels division had been tough, with corporate rates at the Inter- Continental and Crowne Plaza brands expected to be flat or worse in 2003. It will demerge its hotel and pubs business in April, returning pounds 700 million to shareholders. Broker UBS Warburg is reviewing its buy rating and 730p target.

Hotel shares slid on the news, with Millennium & Copthorne shedding 4p to 2231/2p and Thistle sliding 4p to 121p.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed in the tables. Ofex prices relate to the previous close.

Copyright 2002
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