Google shares continue to slide as poor US corporate news hits markets

A day after Google suffered the biggest share price drop in history, there was little respite for the search engine's investors.

Some £15bn was wiped off Google's value on Thursday after the accidental release of its third quarter results ahead of time. Google - which had recently overtaken Microsoft to become the second largest US technology company after Apple - blamed financial printing firm R.R. Donnelley for the mistake.

More to the point, the figures showed a 20% fall in quarterly net income to $2.18bn and missed analysts' expectations. Part of the problem is that Google has been struggling to turn around loss-making mobile phone group Motorola Mobility which it bought for $12.5bn.

In early trading on Friday, the company's shares had lost another 2% to $681.

Google was one of a number of major US companies to report disappointing results, with others including Microsoft, General Electric and Intel. So Wall Street celebrated the 25th anniversary of the October 1987 crash with an early decline of more than 130 points, as the corporate news outweighed earlier positive US economic data such as retail sales and industrial production.

Leading shares in London followed Wall Street's lead, with the FTSE 100 finishing 20.90 points lower at 5896.15. But over the week it added 103 points and touched a seven month high on Thursday. Investors had been cautiously optimistic in the run-up to the latest two day EU summit which ended on Friday afternoon, encouraged by news that Moody's had decided not to cut its credit rating on Spain. But despite late night meetings, the summit failed to produce any real breakthroughs.

Banks came under pressure following one EU agreement, a compromise deal on banking supervision. More immediately, investors in the sector were nervous about increases in the compensation bill for mis-selling payment protection insurance, after Barclays raised its provision by another £700m to £2bn on Thursday. The total cost could now reach £15bn, said analysts.

Barclays shares had been buoyed recently after strong performances from US investment banks. It said despite the increase in the PPI bill it still expected to meet market expectations for third quarter profits, but analysts said merely meeting forecasts would be seen as disappointing. Nomura, which has a reduce rating on the bank, said:

Looking at the strength of the results at US peers, meeting what we think of as semi-stale consensus is as good as a miss. The results are bound to underwhelm the market which would have expected some relative strength.

Barclays fell 6.85p to 233.85p, Lloyds Banking Group lost 1.38p to 40.49p after its Bank of Scotland division was fined £4.2m for holding inaccurate mortgage records, while Royal Bank of Scotland dipped 6p to 281p.

Elsewhere Burberry was 8p better at £11.88 after Investec lifted its recommendation from hold to buy. Analyst Bethany Hocking said:

We return to our bullish stance, after a brief period at hold post the profit warning. The first half pre-close reported two key pieces of news in our view -"a modest improvement" at the period end and a continued elevation in the 'luxury' nature of product sales. We have tweaked some assumptions, with the net effect of marginal increases in 2013 to 2015 pretax profit estimates. The Burberry brand is far from broken, operational leverage should come through, and, whilst volatility will remain, we see long-term value here.

Property group Hammerson moved 7.3p higher to 483.4p after paying £254m for four retail parks, including the Thurrock shopping park and Bristol's Imperial retail park.

Among the mid-caps Redrow crumbled 6.1p to 156.4p after an attempt to buy the housebuilder by its founder collapsed after the market closed on Thursday.

Steve Morgan and a consortium including Redrow's second largest shareholder Toscafund had offered 152p a share for the business, valuing it at £562m. Other investors believed the price was two low, and there was talk a new offer of between 165p and 170p was being considered. But after the takeover panel extended the original bid deadline twice, no agreement could be reached and the discussions were terminated.

Traders had been looking for the next industrial group to warn on earnings after downbeat statements from the likes of Cookson and Morgan Crucible.

Spectris, the testing and controls equipment group, was expected to join the club, but instead it issued an upbeat statement and its shares soared nearly 12% to £17.79. It said sales had increased by 12% during the last quarter, including a contribution from recent acquisitions which was offset by a negative currency effect. At constant currency rates sales were up 2%, albeit this was a slowdown on the first half. It said:

Spectris remains well positioned to deliver on its expectations for the year as it realises both the benefits of its recent acquisitions, especially Omega, and the increase in the proportion of resilient revenues generated in the business.

Andy Douglas at Jefferies said:

This is a resilient performance and better than many will have feared, with slower growth versus the first half of 2012, reflecting the macro-economic environment - this has been anticipated by the market. The outlook statement is 'in-line' for the full year, and whilst the top-end of consensus may be trimmed, we firmly reiterate our buy recommendation.

But Drax, the coal-fired power station company, dropped 17.5p to 532.5p after HSBC downgraded its recommendation from overweight to neutral and cut its target price from 600p to 580p. The bank said:

We are comfortable about biomass feedstock availability for the first phase of the company's coal-to-biomass transition plans. The CO2 price floor may boost the profitability of biomass but as it stands will lead to electricity demand destruction.

Man continued its recent poor run, falling 2.4p to 81p. The hedge fund manager admitted on Thursday more client cash had been withdrawn than came in for the fifth quarter in a row, and warned there were few signs of improvement. Numis issued a sell note, saying:

Whilst there are some tentative signs that investor sentiment and flows have improved in the asset management industry generally (especially in Europe), Man does not seem to be benefiting from this. We continue to consider Man uninvestable, unless the share price were to fall below its liquidation value (all else equal), which we estimate as being worth 50p to 75p a share.

Finally Pathfinder Minerals put on 14% to 1.875p after the mining company won a UK high court judgement confirming it was the rightful owner of its Mozambique subsidiary, CMDN, which holds two titanium licences. Pathfinder discovered last December that its mining licences had been transferred to an unaffiliated company in Mozambique called Pathfinder Mozambique, belonging to its former local partner, General Veloso. The company now has to have the UK ruling enforced in Mozambique.