Market Report: Falls herald first post-summer trading day

Despite yesterday's traditional place in the calendar as the end of the summer holidays, markets were unable to maintain the spikes of last week. The index of leading shares closed the day down 1.8 per cent at 4,819.7, with watchers at the spread-betting group Capital Spreads arguing that there is nervousness about the direction of the FTSE 100: "It is very difficult to get a handle on the immediate future moves for the index as we have now ground to a halt over the last week or so. Those who have missed out on the whole rally (probably the majority) are still waiting for that 'pull back', which will allow them a reasonable entry point."

The first week of September is often bereft of corporate news, and as such the drop in the FTSE 100 was led by RSA Insurance Group, which fell 4.8 per cent to 124p as investors got their first opportunity to respond to weekend reports that the group plans a £1bn rights issue to shore up its balance sheet. The group shunned calls to make an announcement yesterday, and has so far refused to comments on the rumours.

Aside from RSA, the downward momentum in the leading index was by the miners after the sector had been the chief agent of last week's hikes. The South African platinum miners, Anglo American and Lonmin, were both down 4.9 per cent, to 1922p and 1389p respectively, after the country's miners' union said that a strike at Impala Platinum, the Johannesburg-listed group, was likely to spread to other sites. This does not directly affect the FTSE companies, but South African unions have a history of negotiating above-inflation pay deals, and any settlement with Impala could to lead to settlements elsewhere. South Africa produces 80 per cent of the world's platinum.

It was not just the South Africa-focused groups that were down. The London-listed Kazakh giants Eurasian Natural Resources Corporation, the worst FTSE 100 performer of the day (down 6.9 per cent to 805p) and Kazakhmys (3.5 per cent to 939.5p), were also hit, despite President Nursultan Nazarbayev declaring that the country's financial system, one of the hardest hit during the credit crunch, had returned to "overall stabilisation" with the help of a $19bn state aid package. Perhaps investors were concerned after iron ore spot prices continued to fall, sliding 9 per cent in the last week, to a two-month low. The Indian group Vedanta Resources' share price fell 5.3 per cent to 1698p as Indian iron ore was quoted at $84/$87 a tonne, against $93/$94 a tonne a week ago.

There was better news among the FTSE 100 pharmaceutical groups, which bucked the downward trend on a day when gains were modest. The industry is largely perceived as a safe sector in a recession, but has feared that the charge of racier stocks in the last few months would lead to downward pressure on prices. However, the share prices in the sector have always been dependent on news, and yesterday's 0.6 per cent increase (to 2856p) from AstraZeneca followed impressive trials of its blood thinning agent Brilinta. Goldman Sachs analysts increased their price target for the Anglo-Swedish group to £30, adding that peak sales of Brilinta would likely reach $2.2bn.

The defence group BAE Systems was also a muted winner after the US Defense Secretary, Robert Gates, backed Lockheed Martin Corp's F-35 stealth fighter jet after speculation that cuts at the Pentagon could lead to a drop in orders. Shares in BAE, which is a development partner in the F-35, nudged up 0.2 per cent to 312.7p on the news.

However, the household goods group Reckitt Benckiser led the gainers, rising a touch under 1 per cent to 2880p, after Belgian rival Omega reported a 10 per cent fall in first-half profits.

The tepid performance of the top 100 shares was matched by the FTSE 250. The transport group National Express continued its impressive trading of Friday, when it rejected a bid from its biggest shareholder, however, with the stock rising by 1.6 per cent to 405.1p. The financial publishing outfit Euromoney Institutional Investor continued its impressive form of the last three months, with the shares creeping up 0.1 per cent to 270p, on the continuing news that the investment banks are returning to some semblance of health.

The video game retailer Game Group was also up 4.5p to 165p after rumours that Nintendo may respond in kind to rival Sony's Playstation recent price cut. Altium Securities analysts said the recommended retail price of the Nintendo Wii is likely to be cut from £199 to £149, which would boost demand across the group's chain of outlets.

There was less good news for the housebuilder Taylor Wimpey, which ended the day down 8 per cent at 51.6p. The drop did not appear to have been prompted by any specific news, but investors may have decided to take profits following the 78 per cent jump in the stock over the last six months.

The Russian-based gold miner Peter Hambro Mining fell 6 per cent to 725p after a surge last week following the group's impressive interim results.

In Small Cap land, the Syrian oil exploration group Gulfsands Petroleum denied that it had been approached by the Chinese state-owned oil group Sinochem, which last month agreed to buy Gulfsands' partner in Syria, Emerald Energy. Shares in Gulfsands jumped 10 per cent during the day, but closed up a more modest 2.8 per cent at 243p.