Market Report: Sarin departure rumours put life into Vodafone

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The Independent Online

On a slow Friday in London, Vodafone Group provided the chief source of excitement after rumours suggested that its under-pressure chief executive, Arun Sarin, was poised to go.

It was said that Mr Sarin was to be replaced by David Finch, the highly regarded finance director of rival mobile phone operator O2. Though later proven to be wide of the mark, the talk sparked hungry buying of Vodafone shares.

More than 200 million changed hands between 3pm and 4pm, roughly the same number that traded throughout the earlier part of the day. Down 4.5p at their worst, Vodafone shares were chased 0.25p higher than they opened before settling 2p lower at 110p.

Sentiment towards Vodafone remained fragile after a profits warning this week from German peer Deutsche Telekom. ABN Amro said regulatory and competition concerns meant it no longer rated the shares a buy, while JP Morgan also turned more cautious. Citigroup disagreed, arguing that Vodafone shares were worth more than 150p.

Meanwhile. the FTSE 100 trod water, edging 3.3 points lower to 5,820.1 as investors sat on the sidelines while digesting the likely economic impact of the alleged terrorist plot foiled by Scotland Yard on Thursday. Only 2.2 billion shares changed hands.

Wall Street provided no impetus to buy after surprisingly strong retail sales data reignited fears for inflation. The Dow Jones was about 35 points lower in early trade.

News of a rebound in high-street sales in July buoyed Britain's retailers. The consumer electronics group DSG International added 2.25 to 196.75p and Reckitt Benckiser, the world's biggest maker of household goods, advanced 23p to 2,173p. The sportswear group JJB Sports climbed 5.25p to 179p.

Supermarkets also benefited, as cautious investors were further attracted by their safer, more defensive characteristics. Tesco, aided by upbeat comments from Morgan Stanley, improved 8.25p to 373.25p on confirmation of plans to expand sales of non-food items.

A report that Tesco's plans could include the launch of a homeware catalogue in September unsettled GUS, the owner of the Argos catalogue shops, which fell 16p to 957.5p.

Oil companies were marked lower after it emerged that BP, down 4 at 611p, had bought large supplies of crude on the open market to feed its West Coast refineries. That was taken to be a signal global oil stocks are adequate, despite the shutdown of Alaska's Prudhoe Bay, the world's biggest oil field.

Cairn Energy fell 30p to 2,018p, while the second-liner Dana Petroleum lost 36p to 1,307p. Premier Oil was 16.5 lower at 998.5p after plugging and abandoning an Egyptian well. Merrill Lynch again told clients to buy the shares.

The gloom deepened for online gaming groups after BetonSports canned its US operations before an expected extension to a temporary restraining order preventing it accepting wagers from Americans. PartyGaming fell a further 2p to 109p, while Sportingbet was down 26.25 at 243.75p.

The misery also continued for long-suffering iSoft shareholders. The ailing healthcare software specialist fell 4p more to a fresh low of 50p on further consideration of an impending formal investigation into accounting irregularities. Companies dependent on the tourism industry lost ground again in the wake of Thursday's terror scare. The holiday group First Choice fell 5.75p to 208p and the bookseller W H Smith slipped 8.75p to 472.75p. Airport shops account for half of the sales of Smith's travel division and 12 per cent of total retail sales. The headhunter Michael Page fell 6.25 to 325.75p before first-half results on Monday.

Like food groups, brewers and power firms were in demand. Drax advanced 20p to 944.5p and Scottish & Newcastle added 8.5p to 546p. Northern Foods was 2.5p better at 82.5p after completing the disposal of a distribution business.

Strong quarterly results from the industrial conglomerate ThyssenKrupp buoyed the Anglo-Dutch steel maker Corus 6.25p to 388.25p. Miners improved after a report suggested Brazil's CVRD is poised to launch a $15.1bn cash bid for Inco, a Canadian nickel miner. Xstrata added 11p to 2,253p, while among the smaller companies Oxus Gold jumped 6.5p to 36p as sentiment towards the sector was boosted by higher commodity prices.

On the Alternative Investment Market, the property group Nadlan improved 0.05p to 0.38p after unveiling plans to buy Lancaster House in Bolton for £255,000.