Market Report: Vodafone and Carphone Warehouse set the tone

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The Independent Online

Finding a safe haven in these markets is far from easy, but, perhaps surprisingly, the telecommunications sector provided a port in the storm yesterday as Vodafone and Carphone Warehouse benefited from bullish broker coverage.

Lehman Brothers upped its target price on Vodafone from 180p to 215p, maintaining its "overweight" stance and telling its clients that it has increased its estimates for the mobile phone group. The broker is especially upbeat on Vodafone's emerging market exposure, which should help to shield the company from maturing European markets. The shares climbed 4.2p to close at 188.2p

Meanwhile, Collins Stewart reiterated its "buy" stance on Carphone Warehouse ahead of Thursday's results with a 420p target price. The broker believes that the market will focus on profits from its telecoms business but the broker also pointed out that it expects most of the growth to come from cost savings brought about by the unbundling of the local BT loop. Carphone closed 8.25p better at 353.25p, the best performer in the blue chips.

Banks and mining stocks accounted for a significant proportion of falls in the blue chip index. Given their significant weighting in the market and the fact that not one stock from either sector closed the session in the black, that is no surprise. Mortgage bank Alliance & Leicester was the worst offender, down 29p at 701.5p, while Vedanta Resources, down 86p at 2,100p and Rio Tinto, off 168p at 41,97p, were the worst of the miners.

The biggest faller was J Sainsbury, as the Qatari-backed investment group Delta Two pulled out of takeover talks. Although several brokers pointed out that the group is fundamentally sound and should report decent interim numbers next Wednesday, the end of talks resulted in widespread profit-taking. The shares closed 115p lower at 440p.

In the wider market, the ousting of Charles Prince, chief executive of Citigroup left traders very nervous. The FTSE 100 was in the red all session, and although a 69.2 fall to 6,461.4 was not as bad as some had forecast, traders believe there are more falls still to come.

Just like in the blue chips, winners were few and far between in the second line stocks, with illiquid stocks making the best gains. Hochschild Mining bucked the large cap mining trend by adding 21.25p to 459.25p.

After two weeks of decent gains against a weaker wider market, some profit-taking bit into Helphire, the non-fault accident management group. The stock has held up well but two directors exercised options yesterday; David Robertson selling almost 40,000 shares as soon as he exercised. Investors needed little encouragement to follow suit, sending the stock 30.75p worse to 402.75p, the worst performer in the mid caps.

Also heading south was the industrial oven and fridge maker Enodis, down 10.75p to 205.25p, as punters cashed in on some takeover speculation last week. Takeover talk is never far away from Enodis, as the company spurned two offers last year from American rivals. But traders said that, given the current credit environment, speculation about another bid was "far fetched" at the moment.

The engineering consultancy WS Atkins was also out of favour. The shares have been among the best performers in the mid market over the past four years but got a jolt as Merrill Lynch initiated coverage by advising its clients to sell the shares. The US investment bank told clients that it sees more risk in the shares than the current price implies. By the close the shares were 48p worse at 1,152p.

Eicom rallied following last week's fund raising, which took place at a 50 per cent discount to the prevailing market price. The market took heart from confirmation that German insurance giant Allianz has taken a 7.7 per cent stake in the company, sending the shares soaring to close at 6.25p, a 1.75p gain on the day. However, the gains may be short lived as the new stock is expected to begin trading on Thursday, and given that the average placing price was 3.4p, some selling is expected.

Among the biggest risers in the tiddlers was Tarsus Energy, although for long-term shareholders, yesterday's 68.8 per cent rally to 3.375p, a gain of 1.375p, will be cold comfort. The shares have collapsed in spectacular fashion since listing in early 2005 at 55p, and last week's clearout of institutions at less than a penny a share has tempted some retail buyers into the stock.

Finally, disaster of the day was the recruitment group Greatfleet as it released a worryingly cryptic statement. It told investors that a review of the company's operations has revealed "certain matters" which may have an impact on full-year numbers. Although there was little else to go on, investors headed for the exit, sending the stock 40 per cent lower to close at 4.75p, a loss of 3.125p on the session.

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