Markets weaker as traders weigh up the options Man Group shares plummet 20

Markets lose around 1% as traders weigh up the options – Man Group shares plummet 24% European stock markets turned weaker today, putting a halt on a three-day winning streak as investors locked in their gains and re-evaluated what the likely rescue package could look like after a notable difference of views amongst European fiscal leaders and officials.

The FTSE 100 fell 1.4% whilst the DAX and CAC both saw losses of 0.9%.

The speculation early this week and over the weekend over the types of measures being looked at by the EU and ECB to help contain the financial and debt crisis engulfing Europe, such as a leveraged top up of the EFSF, has notably seen a complete reversal and denials in the last 24 hours. As such, investors are becoming increasingly confused as to exactly what the final rescue package, if any, is likely to look like when the G20 meets in Cannes in early November.

The initial relief rally that European leaders were working hard to inject credible and strong proposals has waned, and investors will now quickly focus on exactly what the proposals will look like. It is no surprise therefore to see equity prices coming off from yesterday’s highs with investors looking to protect their gains from the start of the week.

Mining firms is one area that has seen early profit taking after seeing metal prices reversing yesterday’s gains. Copper prices have fallen by 3%, whilst Silver prices have also fallen back from yesterday’s highs somewhat. The fall in metal prices has triggered some investors into cashing in their gains in the miners early after yesterday’s brief relief from an otherwise very poor trading last week.

Man Group shares plummet 24% on cash outflows
Shares in the world’s largest listed hedge fund Man Group fell 24% in trading on Wednesday after the firm reported a larger than expected outflow of client funds over the last quarter.

Clients withdrew $2.6 billion worth of funds in the quarter due to the extreme market volatility, much more than most had expected with assets under management falling 8% to $65 billion. Analysts had been expected net assets under management to fall to just short of $70 billion, having reached $71 billion in the first half of the year.

There can be no surprise that clients withdrew funds over the last quarter given the market turbulence. However, the fact that more than expected was withdrawn raises concerns that having struggled for so long to regenerate cash inflows – Man had seen inflows of cash of $4.4 billion in the first half of this year – the firm may take some time to recover the funds and confidence lost.

Man Group shares have risen over 40% since the early August lows of 165p and so from that perspective the share price rally since then, when taken into the broader context of the FTSE 100’s struggle, looked overdone and this has most likely exacerbated today’s sharp falls.

The clues were already there too, after seeing Aberdeen Asset Management report strong outflows of client funds, $800m worth, earlier this week for the same period.