Market Report: Vodafone rings up gains with US sale talk

Standard Life, the ninth largest investor in Vodafone, has gone on the record calling for a sale of the Verizon stake, which could make a large dent in Vodafone's debt pile or see a significant sum of cash returned to investors. The stock was bid up to 121p, an increase of 2.5 per cent, as a result. Volume of 552.8 million shares was large but perhaps not surprising, as the company is due to report its results today.

Its house broker, Goldman Sachs, expects Vodafone to have won net new customers of 5.45 million, but most analysts expect the company to struggle to increase revenue per customer, the most looked-for performance indicator for mobile telecoms stocks.

One of Vodafone's main rivals, O2, gave the sector support by reporting an 18 per cent rise in its subscriber base, comfortably ahead of consensus forecasts, in its last trading update before the Spanish national telecoms carrier Telefónica completes its £17.7bn takeover of the group. The new chairman and chief executive, Peter Erskine, reported that O2 picked up another 1.75 million subscribers in the UK, Ireland and Germany, and the shares rallied half a penny to 199.75p.

After the Dow Jones had its worst trading session in three years on Friday and the Nikkei dropped another 2 per cent overnight, London traders could have been forgiven for wanting to stay in bed yesterday morning. With oil prices near $70 a barrel, the continuing fallout from the Livedoor scandal in Japan and uninspiring results from Google and GE, traders and investors would have woken up expecting red screens across the City and a rush of sell orders.

However, those who braved the journey into work were rewarded with some robust trading among blue chips. Although the benchmark FTSE 100 fell by more than 30 points soon after trading began, a flood of sell orders did not materialise and the index remained in a range of between 30 and 35 points down for most of the day. After a late rally, it closed the day down 11.5 at 5660.9.

Mining stocks were again in focus as Dresdner Kleinwort Wasserstein reiterated its "overweight" stance on the sector. In a note to clients, the German broker said it sees further upside in every stock it covers in the sector, despite the strong gains that most stocks in the sector have experienced in the past 12 months. It increased its price targets on Antofagasta (up 5p to 1,895p), Rio Tinto (down 11p at 2,862p), Anglo American (down 9p to 2,006.5) and BHP Billiton (down 9p to 1,011p).

Centrica, once the distribution arm of British Gas and the UK's largest gas utility by customers, benefited from bid rumours and gained 1.75p to 265p, having traded as high as 274p earlier in the day. The Russian gas giant Gazprom was reported to have been considering an offer for Centrica, which one analyst thought could value the company at more than £12bn.

Shares in the London Stock Exchange were in demand, as the hostile take-over bid from Macquarie Bank looked doomed to fail. Traders were betting that the LSE would either defeat the Macquarie bid outright or a counter offer would be made for the exchange, possibly from Nasdaq, the US technology market. Macquarie has offered 580p per LSE share, but more buyers yesterday sent the stock soaring above 700p for the first time since it listed. Its shares closed at 711p, up 21p.

Among the smaller stocks Trafficmaster,a manufacturer of in-car navigation devices, reported on upbeat trading conditions as more car makers started fitting its technology as standard during the last half year, although it added that full-year trading results would be only in line with market expectations.

Trafficmaster's chief executive Tony Eales said the group's recent restructuring meant the company was now "well placed to benefit from further revenue growth in 2006". The shares, which during the technology, media and telecoms boom of the late 1990s had traded as high as 1,100p, gained 3.5p to close at 40p. The broker Bridgewell Securities upgraded its stance on the stock to "overweight".

The star performer among the smaller caps was Provexis, a manufacturer of health foods, rising 26.5 per cent to 10.75p on the back of a new distribution deal to have its health drink Sirco sold in 550 outlets of an unnamed supermarket chain. The group already has its products sold in 211 Sainsbury's stores and 123 Waitrose stores, and traders were betting that the new deal has been struck with Tesco.