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MARKET REPORT: Stocks topple due to rail rescue

MARKET REPORT: Transportation groups start the week in reverse after government abolished railroad franchising model in effect since 1990s

Transportation groups started the week in reverse after the government dropped the rail franchise model, which has been in effect since the 1990s.

Ministers agreed to expand state aid to the railways after the pandemic virtually wiped out ticket revenues as workers were advised to stay at home.

Govia Thameslink Railway and Southeastern operator Go-Ahead Group and Great Western Railway operator FirstGroup both said they had signed contracts with the government to run the services for the next six to 18 months. The emergency measures ensure that the losses of the companies are covered by the taxpayer.

But it also means that they will make less money on the temporary contracts than other short-term deals closed earlier this year. And the end of the franchise model means the system is likely to be less lucrative for them in the future – with ministers considering concession-based systems according to which train companies would receive a flat fee to run services. Go-Ahead shares fell 4.8 percent, or 31.5p, to 620p, while FirstGroup fell 12.2 percent, or 5.22p, to 37.48p.

But it was the shares in Stagecoach, whose rail concession contracts expired last year, that fell the most – by 17.7 percent or 7.84 pence to 36.4 pence.

Rolls-Royce stock fell 10.8 percent, or 19.45p, to 160.7p to its lowest level since early 2004, after it confirmed to press reports over the weekend that it plans to raise £ 2.5 billion .

The company said it was considering raising the money through a “ variety of structures, ” such as selling new shares or other cash injections.

This is more than rumors as the city previously expected it to be around £ 2 billion, and also said Singapore’s sovereign wealth fund could be withdrawn. The jewel in Britain’s engineering crown, Rolls has been hammered during the Covid-19 crisis by massive flight cancellations – wiping out the income it earns from servicing jet engines.

About £ 52 billion was wiped from the value of the FTSE100 in a difficult day for the stock markets as Britain faltered on the verge of introducing tighter restrictions on the coronavirus.

The Footsie fell 3.4 percent, or 202.76 points, to 5,804.29, with only four companies closing higher.

Supermarkets were on the rise – as they are likely to see a brief increase in sales and still see strong demand even in the event of a second nationwide lockdown.

Tesco closed 2.7 percent, or 5.9p, to 225.5p, Morrisons rose 2.3 percent, or 3.95p, to 178.2p, and Sainsbury’s went 0.9 percent, or 1.75p, to 196, 75p. Just Eat Takeaway climbed 1.4 percent, or 116p, to 8544p at the close.

The FTSE 250, which is more exposed to UK events and is the index on which many leisure firms are listed, fell 4 percent, or 698.9 points, to 16,870.78.

Government contractor Babcock was among the fallers of the day, but managed to recoup the losses after a late announcement that boss David Lockwood had bought nearly £ 100,000 worth of shares in the group.

Lockwood, who headed Cobham, took over the position of CEO from Babcock in July.

That month he bought about £ 300,000 worth of shares.

Babcock’s shares fell 6 percent early in trading, but closed the day at 1.3 percent, or 2.8p, to 215p.

Conference organizer Informa crashed to a loss of £ 801 million in the first half after Covid canceled or delayed most events.

The world’s largest events group said local lockdowns, quarantine restrictions and increasing infections had dashed its original hope that things would recover from September, which it said was “not possible” outside of China.

Shares of the group closed 3.4 percent, or 13p, to 367.6p.