FTSE weighed down by phone operators

Listen to this article

00:00
00:00

Investors took a wary line on Tuesday with Amec, the construction services group, while concerns about prospects for the leading mobile phone operators also preyed on sentiment.

The concern over Amec stemmed from talk that it would be named as part of a lawsuit being brought by a consortium of firefighters, police officers and Ground Zero workers who say they were exposed to toxic chemicals released by the September 11 attacks in New York.

The lawsuit is seeking $1.4bn for exposure to materials such as asbestos that were released into the air when the Twin Towers fell.

Amec was one of four companies hired to clean up the site. It has not been formally notified of any suit, but the company said it was confident it would be protected fully by a specific insurance policy supported by the US government to the tune of $1bn.

The story also damped takeover rumours surrounding Amec. The stock has been inflated since mid-August on talk of a 400p per share offer from one of three US companies, including Fluor. “Even if the allegations are not true, the word ‘asbestos' is probably enough to scare people off until the issue is over,” said one dealer. Amec shares closed down 4.4 per cent at 307p.

The FTSE 100 closed down 0.3 per cent at 4,545.6 while the FTSE 250 index was 0.3 per cent weaker at 6,251.4. Volume was 2.8bn shares.

Vodafone and MMO2 fell after Citigroup cut its rating on both mobile telecoms operators to “sell” from “hold”. The broker said it expected profit margins to come under pressure as part of the transition to 3G and operators faced a growth crunch as the migration from fixed phone lines to mobiles could diminish.

There was also disappointment for Vodafone from France, where its minority-owned network Cegetel reported a strong improvement in operating profits. Traders feared that if and when Vodafone has to negotiate with Cegetel's majority shareholder Vivendi Universal about taking over the unit, Vodafone would have to pay a higher price. Vodafone lost 3 per cent to 129¼p while MMO2 shed 0.3 per cent.

A Lehman Brothers upgrade helped GlaxoSmithKline, the drugs group, put on 1.3 per cent to £11.81. The broker moved to “overweight” from “equal-weight” arguing that the second quarter marked the trough in its earnings performance, and earnings per share momentum should improve in the next few months, as would news from its pipeline of drugs. It also set a new target price of £13.10.

Two of the UK's largest clothing retailers offered contrasting impressions of recent trading on the high street. Designer fashion chain Next rose 2.7 per cent to £15.58 as it delivered its almost-standard set of strong earnings. However, rival French Connection slumped 11.6 per cent to 329¼p as it flagged up “unusually poor” trading conditions in August in the UK. However, several analysts felt the reaction was overdone, with both Numis Securities and Seymour Pierce maintaining their “outperform” rating.

Cookson, the industrial materials group, climbed 3.8 per cent to 34¼p amid heavy volume of 47m as Merrill Lynch upgraded the stock to “buy” from “neutral” following a period of share price underperformance. The broker said the market had been factoring in an excessive degree of risk, driven mainly by concerns in the chip industry and its earnings outlook for 2005.

There was speculative buying in LogicaCMG, the IT services group, after upbeat comments from Investec Securities. Analyst Gareth Evans said Logica's Wireless Networks unit was entering a watershed six months, with good signs that the mobile software market was extremely strong. The shares rose 1.8 per cent to 187¼p.

Regent Inns slumped 14.9 per cent to 31½p after it delayed publication of its final results because it broke procedures set out in its bank loans.

Cambridge Mineral Resources, the gold miner, was up 7.3 per cent at 11p after it reported discoveries at a site in Spain, while hedge fund group RAB Capital invested another $1.2m into its joint venture exploration project in the Falklands.

Galleon Holdings, the multimedia company, undertook a 1-for-100 share consolidation and 960m shares became 9.6m. The adjusted share price fell 3.8 per cent to 25½p.

Moneybox, the Aim-listed independent cash machine operator, dived 27.8 per cent to 19½p as it warned late on Monday that full-year profits would be below expectations.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.