A weak opening on Wall Street, triggered by chip maker Intel’s forecast of a drop in first-quarter sales and poor performance from index heavyweight Vodafone , saw the blue chip index close loweryesterday.
The FTSE 100 finished 5.3 points lower at 4,456.1 with Vodafone down 3.5p at 146p. Traders said Vodafone had been unsettled by events in the US on Wednesday where it had emerged that AT&T Wireless was in takeover talks with rival US operator Cingular.
They said the talks had raised concerns that Vodafone, whose presence in the US consists of a minority stake in Verizon Wireless, might make an offer for AT&T Wireless or try and take control of Verizon.
Analysts said Vodafone had also been affected by the third- quarter trading update from Carphone Warehouse , off 12p at 143p, which showed increased subsidies had been used to drive sales of subscription and pre-pay phones over the festive period.
According to Mark James, telecoms analyst at Nomura, if this trend continues it could mean that Vodafone and rival MMO 2 , up 0.5p to 79.5p, struggle to beat market forecasts.
Elsewhere, Tesco , down 5p to 242p, remained in the doldrums. Dealers reckon Tesco struggled to get Tuesday’s pounds 800m fundraising away and was forced to place some of stock with hedge funds and proprietary trading desks, who have since been selling in order to cap losses.
“It does not look as if this fundraising was handled at all well,” one senior market man said.
On a brighter note, Abbey National climbed 20.5p to 579p with traders reporting switching out of Lloyds TSB , up 5.5p to 466.5p, and technical buying. “560-565p was a major resistance level for this stock,” one chart watcher said.
Elsewhere, there were further gains for the life assurance sector as Dresdner Kleinwort Wassertein followed Wednesday’s lead from Merrill Lynch and upgraded its rating on the sector to overweight citing improving consumer sentiment toward savings products.
Like Merrill, Dresdner’s favourite play in the sector is Legal & General , up 2.75p to 107.75p yesterday. It also likes Aviva , 11.5p higher at 498.5p, which it yesterday upgraded to add.
Reckitt Benckiser , the Anglo-Dutch consumer goods group, was also in good form climbing 28p to pounds 12.73 after Deutsche Bank advised clients to buy. “Reckitt has underperformed its European peers, Henkel and Unilever, as well as the broader market for the past month, which presents an excellent buying opportunity,” Deutsche said.
Advertising agency WPP bounced back from early losses to close 16p stronger at 628.5p, lifted by continued institutional demand for cyclical stocks and news that Investec Securities had finally dropped its reduce rating.
As the only UK media stock offering global exposure to the advertising recovery, Investec reckons WPP will increasingly be the focus of investor attention in 2004 and has therefore been upgraded to hold.
Away from the blue chips the FTSE 250 rose 22.8 points to 6.038.9 with P&O , the ports and shipping group, rising 9.25p to 253.75p after joint broker CSFB upgraded it to outperform from neutral on valuation grounds.
Since the company’s third-quarter trading update in November, P&O shares have fallen 13% and underperformed the FTSE All-Share index by 16.5%. CSFB believes this has created a good buying opportunity especially as 2004 could be the year in which P&O finally disposes of its holding in container shipping group P&O Nedlloyd.
“Although a complete disposal for cash is the optimal outcome, it is worth noting that the strength in Nedlloyd’s share price increases the likelihood that a reverse listing (via Nedlloyd) of P&O Nedlloyd could be seen,” CSFB said.
Elsewhere, fashion retailer New Look continued its recent good run, rising a further 3p to 328.5p. That performance took its gains since Tuesday’s trading update to 5%. Dealers believe that performance suggests founder Tom Singh is close to making a formal offer for the company.
Intertek , the provider of testing services, was marked 11.25p higher at 493.5p after the chief executive of Swiss rival SGS signalled he was preparing to make an acquisition.
In the smaller companies world the FTSE Small Cap index rose 7.3 points to 2,560 with biotech group Protherics among the best performers. Its shares rose 4.75p to 59p after Abbott Labs announced it had filed for US regulatory approval of its Enfer rapid BSE test. Protherics earns a royalty on sales of the test.
Easyscreen , the derivatives software company, was also in demand amid talk of contract wins in the US. Its shares moved up 3.5p to 27.75p
Meanwhile, bid speculation continued to swirl around set top box maker Pace Micro Technology , 3p stronger at 38p. This week reports claimed South Africa’s Altech, which has about pounds 100m in cash, was in acquisition mode.
Newsplayer , the online newsreel group, firmed 1p to 22.5p after confirming that it is in talks to acquire a business in the US. Market gossips reckon the deal will be earnings enhancing.
In the bond market, gilts closed lower after the latest economic data from the US added weight to the view that its economic recovery is gathering pace and that rates could rise sooner than expected. The benchmark 10-year gilt closed at 125.530, yielding 4.676%.
