Market Report: BlackBerry rumours engage Vodafone

Toby Green
Saturday 22 October 2011 08:32

With a shell-shocked top-tier index plummeting yesterday to its lowest level in 15 months, Vodafone was on the slide as speculation spread it could be eyeing up the BlackBerry manufacturer Research in Motion (RIM).

The Canadian technology giant shot up almost 10 per cent on Wall Street during early trading amid vague rumours claiming the troubled company had asked an investment bank to consider various strategic options.

Gossips were suggesting RIM, which issued a string of profit warnings recently, may become a takeover target as a result, and – saying it could fetch $45 a share – put forward Vodafone as one of the potential aggressors.

City voices were not impressed by the mutterings, pointing out that the strategy of the mobile telecoms group (which retreated 1.9p to 166.65p) was unlikely to involve a move into mobile handset manufacturing.

They did, however, say further consolidation in RIM's sector was likely thanks to the success of Apple, which last night was expected to unveil the latest version of its iPhone. Vague whispers also claimed Microsoft and Oracle could be possible bidders for RIM, with further speculation adding that Google may be tempted into making a move.

Yet another tough day on the markets saw the FTSE 100 finish below 5,000 points for the first time since July 2010. Knocked back 131.06 points to 4,944.44, the benchmark index's five-day losing streak has now seen it shed nearly 7 per cent.

"We are hostage to political events," sighed one resigned trader, as the eurozone sovereign-debt crisis dominated the session once again following the news that the region's leaders are delaying the next bailout payment for Greece.

With fears over its exposure to Greece still causing sizeable damage to the Franco-Belgian bank Dexia and Germany's Deutsche Bank issuing a profits warning, there was further pain for their UK peers. Barclays slumped 11.9p to 144.35p despite reassuring comments from its chief executive, Bob Diamond, while Lloyds was pegged back 1.66p to 31.8p.

In the wider financial sector, Man Group extended its losses since last Wednesday's trading update to over a third, sliding 1.7p to 159.1p as Morgan Stanley downgraded the hedge fund manager's rating to "equalweight".

Shrugging off analysts' attempts to provide support, the miners continued their march downwards thanks to fears over a drop in global demand. Kazakhstan-based rivals Eurasian Natural Resources and Kazakhmys dropped 29.5p to 522p and 33p to 730p respectively, despite HSBC's Lourina Pretorius starting her coverage on both with an "overweight" recommendation.

Their peers were also in the red, ignoring comments from Goldman Sachs' analysts who argued that commodity prices would rebound strongly next year.

Credit Suisse, meanwhile, slashed target prices across the sector, although the broker still said it believed "strongly in the long run for the emerging market growth story".

Only five blue-chip companies managed to post gains, including Tesco which climbed 9.6p to 380.1p ahead of today's interim results. UBS gave the supermarket a "buy" rating, saying its share price "represents a material pricing anomaly at the current level". Sainsbury's, which also updates the market today, slipped back 6.4p to 274.7p.

In a strong day for the retailers generally, Home Retail topped the FTSE 250 by powering up 3.1p to 121.7p. The group saw the return of whispers on Monday claiming the Asda-owner Walmart could be eyeing up the company, while there was also vague talk of private equity interest in its Argos business, although Arden Partners' Nick Bubb rubbished both tales.

The online grocer Ocado lost more than 11 per cent of its share price, leaving it at a new low of 88.05p. Shore Capital reiterated its "sell" advice, highlighting as negative the recent opening of a new "dark store" for online orders near London by its rival Waitrose.

Hikma Pharmaceuticals edged up 3p to 566.5p after revealing late on Monday it had agreed to buy a 64 per cent stake in Moroccan drugs maker Promopharm, with UBS analyst Martin Wales saying the deal could prompt "possible market expansion in more Western African countries".

Despite hopeful mutterings suggesting it will use today's full-year results to reveal positive news about its takeover talks with mid-tier bookmaker Ladbrokes (6.2p worse off at 114p), the online gaming group Sportingbet still shifted back 3p to 41.75p on the small-cap index.

Down on the Alternative Investment Market, FFastfill slumped 17.02 per cent to 9.75p after warning it would only break-even over the first half of the year. It is the latest run of bad news for the trading technology sector, with Patsystems announcing on Monday it had been hit by a number of delayed deals.

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