The rally that propelled London’s FTSE 100 to its highest level since mid-March faltered on Tuesday, largely thanks to a slide in Vodafone.
The world’s largest mobile network operator, which makes up almost 8 per cent of the FTSE 100, suffered its worst one-day performance for 12 months, falling 4.8 per cent lower to 139½p.
The share slide, which came in spite of a doubling of its dividend and a hefty share buy-back, was prompted by fears that increased competition, including in the UK and Japan, could erode Vodafone’s margins. Cazenove slashed the stock from “outperform” to “in-line”.
However, Stuart Fowler, head of UK equities at Axa Investment Managers, said the stock was just given back its gains of last week, when the shares gained on strong figures from its UK rivals. “[Vodafone] is still a solid company and in our opinion the shares look undervalued,” he said.
The FTSE 100 slipped 7.3 points, or 0.2 per cent, to 4982.5 while the mid-cap FTSE 250 rose 14.7 points, or 0.21 per cent, to 7001.7. Volumes of 2.8bn were low.
Scottish Power was a leading gainer, rising 6.3 per cent higher to 469¾p after the utility combined record profits of more than £1bn with surprise news of the $9.4bn sale of PacifiCorp, its US arm.
As well as pledging to return much of the proceeds to investors, some speculated the disposal made it a more attractive bid target.
However, Angelos Anastasiou, analyst at Williams de Broe, said: “Getting rid of PacifiCorp makes it a more focused business, but I do not think that necessarily makes Scottish Power a takeover target.”
Elsewhere, mining stocks were boosted by reports in the Australian press that Rio Tinto was running the rule over rival Xstrata.
Rio Tinto rose 1.8 per cent to £16.32, Xstrata added 1.7 per cent to 976p and BHP Billiton gained 2.2 per cent to 652p.
Marks & Spencer added 1.4 per cent to 341¾p as the retailer confirming a 19 per cent fall in annual sales, capping an eventful year.
Stuart Rose, chief executive, pledged the benefits of his turnaround strategy “would become increasingly apparent”, although not all were convinced.
Iain McDonald, analyst at Numis, said: “We remain pessimistic about prospects for the current year. M&S will continue to come under pressure from Waitrose’s ongoing expansion plans, Tesco’s relentless march forwards and any recovery at Sainsbury’s.”
Elsewhere, relief at largely benign full-year figures helped publisher and radio broadcaster Emap 3.9 per cent higher to 795p.
Northern Rock, the bank, added 1.7 per cent to 763p, buoyed by a bullish research note from Lehman Brothers, which set a price target of 938p.
Among the mid-caps, EasyJet slumped 5 per cent to 235½p after higher fuel costs pushed the budget airline to a wider interim loss. “Fuel price remains a key concern,” said Gert Zonnevald at Panmure Gordon. “If fuel prices remain at current levels (or increase further), Easyjet’s operating margins will struggle to recover from the currently low levels”.
EMI slipped 1.6 per cent to 237½p as investors worried about the music group’s transition into the digital age, particularly in North America. Panmure Gordon said EMI had a tendency to disappoint and slashed its rating on the stock from “hold” to “sell” and its price target from 250p to 200p.
Office space provider Regus fell 5.4 per cent to 87p ahead of its annual meeting tomorrow. Regus was one of the stocks caught up in recent rumoured heavy forced selling by some major dealers in contracts-for-difference positions and its shares have fallen almost 30 per cent over the last month.
It was a top day for flooring specialist Topps TiIes, up 11.5 per cent to 196p, partly on short covering. A sharp jump in profits and higher like-for-like sales were in stark contrast to March’s profit warning. Numis upped its price target from 195p to 205p.
SSL rose 0.7 per cent 265p after the maker of Durex condoms and Scholl footwear returned to profit for the year to the end of March.
Shire Pharmaceuticals gained 0.4 per cent to 565½p after New River, its partner in an experimental treatment to combat attention deficit disorder, noted upbeat trials of the new drug.
Paladin Resources rose 2.3 per cent to 178p after the oil and gas explorer bought further assets in the Fiddich field, east of Aberdeen.