Market update - 11 November

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The Independent Online

The FTSE 100 was down 104.61 points at 4299.31 while the FTSE 250 fell to 6519.95, down 136.61 points, at 12.15pm.

Sentiment sank after a series of disappointing company announcements sparked concern about the state of the corporate earnings – Intercontinental Hotels, the FTSE 100-listed hospitality group, warned of a sharp deterioration in market conditions in October while Cookson, the mid-cap engineering business, said full year performance for 2008 was unlikely to meet expectations.

Taylor Wimpey, the FTSE 250-listed house builder, added to the gloom – in an interim management statement published this morning, the company spoke of “extremely challenging” conditions and said that the recent financial market turmoil had further depressed consumer confidence. The house builder added that talks with debt providers were continuing and a revised covenant structure will only be concluded next year. Weighing in on the update, Panmure Gordon said that company “will need to undertake a dilutive fundraising in order to lower its debt burden”.

Moving up

Vodafone, up 9.19 per cent or 9.95p at 118.25p, offered some solace for investors – the telecoms group announced a 10.5 per cent rise in adjusted interim operating profits, to £5.8bn, on revenues of £19.9bn, up 17.1 per cent. Investors were also pleased by a £1bn cost reduction programme. On the downside, the group lowered its revenue guidance for the full year, evoking a mixed response from analysts.

Cazenove, which repeated its “outperform” recommendation for Vodafone, said that the company’s new strategy of focusing on execution and free cash flow generation looked sensible given the changing economic and market conditions. On the other hand, Collins Steward said “sell”, arguing the company’s “cost plans still look limited”.

“Vodafone continues to target just one area (operating costs) of its £22bn cost base,” the broker said,

“Plans are to keep European operating costs (25 per cent of the £22bn) flat and to grow EMAPA (Europe, Middle East, Africa and Asia Pacific) operating costs (10 per cent [of the cost base]) slower than revenues. But the other 65 per cent of costs matter.”

Moving down

The mining sector retreated as the euphoria over China’s economic stimulus package faded – Lonmin was the weakest, losing 9.27 per cent or 110p to 1077p, and Vedanta Resources fell to 741.5p, down more than 7 per cent or 56.5p.

Also on the downside, HSBC fell to 684p, down 7.14 per cent or 52p, after Panmure Gordon reduced its target price for the stock to 680p from 775p.

“We have revised our forecasts to take into account a sharper slowdown in emerging markets, the endowment effect on net interest spreads globally and higher impairment charges,” the broker said, reiterating its “sell” recommendation.