Market Report: Weak Link weighs on Carphone Warehouse

Nervousness ahead of today's trading statement from
Carphone Warehouse sent shares in the group tumbling 6p to 158p yesterday as traders fretted that they could disappoint.

Nervousness ahead of today's trading statement from Carphone Warehouse sent shares in the group tumbling 6p to 158p yesterday as traders fretted that they could disappoint. The worry seems to have been caused by poor sales at Dixons' The Link chain, which like Carphone sells mobile phones. Sales at The Link fell 9 per cent during the usually busy Christmas period.

"It looks as if the December market spike didn't happen this year, which may have implications for Carphone," Nick Bubb, at Evolution Securities, warned. Dixons also indicated that there has been an increase in pay-as-you go handsets over Christmas. This is also bad news for mobile phone retailers such as Carphone which make more money from selling contract packages to customers.

Meanwhile, Carphone's TalkTalk fixed-line telecom business may also be under pressure. Competition in this market has got increasingly fierce as an ever growing number of providers enter the market. This week the Post Office become the latest to provide telephone services to UK householders, leaving the market with more than100 players.

The building materials sector was set alight by news of a bid for Aggregate Industries, 26p better at 140p, from Switzerland's Holcim. Hanson jumped 19.25p to 481p, Ennstone added 3.25p to 40.75p and Marshalls ticked 13p better to 317p as traders hunted for the next bid target in the industry. Analysts pointed out that Hanson has a very similar product offering to Aggregate and so could leave it exposed to a foreign predator. But Dresdner Kleinwort Wasserstein warned that the company's asbestos liabilities act as a poison pill and will defend the company from attack.

Will this be the year that Pilkington is finally taken over? The glass maker has long been talked of as a bid target and yesterday its stock jumped 4.5p to 114p as gossips once again suggested that a move on the company may be on the cards. As with prior to the offer for Aggregate, dealers reported heavy demand for the glass maker's stock as 12.6 million shares changed hands, more than three times the volume seen on an average day. Historically, Japan's Nippon Sheet Glass, which owns 19 per cent of Pilkington, has been seen as the most likely buyer of the company.

The FTSE 100 index fell 35 points to 4,783.6 as the heavyweight banking and insurance sectors were hit by a wave of profit taking. Lloyds TSB, down 6.25p to 466p, was also undermined by a bearish note from Panmure Gordon. The broker urged its clients to exit the company, noting that its shares now stand at the top of their 420p to 470p trading range.

Premier Farnell lost 3.5p to 174.5p as Credit Suisse First Boston warned that the electronics distributor's major markets in the US and UK continue to weaken. The Swiss broker expects Premier Farnell to confirm these increasingly difficult trading conditions at its full-year results presentation scheduled for March.

Aga Foodservices told investors that it will not have any trouble meeting City forecasts for its full year and the news sent its stock 9.25p higher to 280p. Also supporting sentiment towards the group were a series of director share purchases. Leading the way was the chairman, Victor Cocker, who picked up 5,000 shares at 273p. William McGrath, the chief executive, acquired a more modest 3,000 at the same price. Regal Petroleum added 19p to 376p as Bill Humphries, a non-executive director, spent £356,000 on shares in the oil and gas explorer at 356p.

The company is expected to update the market on its oil operations in Greece this month and also issue a statement regarding its Romanian gas prospect next month. Should both updates prove to be positive, brokers expected Regal shares to soar.

River Diamonds added 0.88p to 3.50p as the diamond producer was tipped to be a winner from a recent decision by the diamond monopoly De Beers to raise the price of the unprocessed stones it buys by 3 to 5 per cent.

The AIM-listed River Diamonds is already a producer of rough diamonds in Brazil and hopes add to the size of its reserves by securing further discoveries. Word has it the group will promote itself to institutional investors in the Square Mile in the coming days.

Applied Optical Technologies rose 2.5p to 28p after Mark Turnage, its chief executive, picked up 100,000 shares at 28p. Cornwall Management gained 4p to 139.5p on talk that the recently floated software company is close to announcing a new business win.

Elsewhere, ML Laboratories, the biotechnology group, improved 1p to 18p in the ahead of its results this month.