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Collins Stewart slumps after being hit by market turmoil, but FTSE recovers

As the market tries to make its mind up how to react after Thursday’s £64bn sell-off on the leading index, the current turmoil seems to be bad news for financial group Collins Stewart.

The company’s shares have slumped more than 9%, down 6.5p at 62.5p, after it said the recent stock market turbulence hit its securities business:

Although premature to reach a final view, [the securities division] is unlikely to be able to fully recoup the impact of poor trading before the end of the current financial year. We have however reduced the size of our trading book to guard against further turbulent markets.

Analysts at Peel Hunt said:

The trading statement focuses on the performance of the securities division, nevertheless, in the current climate, we would anticipate corporate broking to be performing below expectations. With three months left this year, there remains a lack of visibility over the full year outcome, with management flagging that the division is unlikely to be able to fully recoup the impact of poor trading.

We would expect to downgrade our full year pretax profit/earnings per share forecasts by approximately 40%-50% to around £15m-£18m from £29.6m/9.3p with 2012 numbers coming down from £36m/11.3p to approximately £18.6m/5.9p.This broadly assumes a breakeven result in securities/corporate broking, although after yesterday this may prove optimistic.

After Thursday’s falls, the FTSE 100 has added 32.15 points to 5073.76, but the mood is far from convincing. More confusion about whether the Greeks believe they will default on their debts is not helping matters, but analysts are seeing some positive signs. Kathleen Brooks at said

The markets have taken a breather today after yesterday’s stunning sell-off in risk. Not even gold was saved yesterday, with the yellow metal fell 3%. But as we head into the weekend the markets have calmed significantly. The dollar is lower, with the euro being the main beneficiary and stock market futures in Europe are poised to open higher.

There are two main drivers for the calm tone of the markets today. Firstly, a statement from the G20 finance chiefs, that saw the world’s financial leaders pledge to address the risks to the global economy. The statement also pushed Europe to sort out its sovereign debt crisis, and Europe’s leaders agreed a deadline to ratify the extension to the EFSF rescue fund by the next Ecofin meeting in mid-October. Since this fund is vital to 1, bailing out the peripheral countries and 2, re-capitalising the banks, this is an important step.

Also, emerging markets are stepping in to use their massive foreign exchange reserves to try and stabilise the Eurozone. Brazil, China and Japan have shown an interest in some form of support – possibly bolstering the funds available at the IMF – although Chinese officials said they would not write a blank cheque for Europe and it must get its fiscal house in order. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds