Market Report: Vodafone powering Footsie on US buzz

Russell Lynch
Saturday 09 March 2013 00:38

The City was piling into Vodafone again today and it wasn't because of the FTSE 100 titan's new contract to supply smartphones to New Zealand's police officers. Welcome though the news may be to the Kiwi law enforcement fraternity, Voda has been the blue-chip story of the week for other reasons: namely speculation over its 45 per cent stake in United States operator Verizon Wireless.

The company, which accounts for more than 5 per cent of the Footsie's total market capitalisation and was worth around £87bn at the last count, has soared like some frothy AIM-listed small-cap amid increasing chatter that Verizon wants to take full control of the stake and even discussed a full-scale merger with the UK firm late last year.

The stock jumped another 3 per cent, or 5.75p, to 184.35p, leaving it nearly 10 per cent up on the week, as analysts at Exane BNP Paribas fuelled the momentum by lifting their target price on the telecoms giant. Despite a roaring performance from the US jobs market, where an extra 236,000 jobs in February surpassed the expectations of even the most rampant bulls, analysts sceptical over the strength of this year's rally point to the excitement around Voda as one of the reasons to be cautious. One dealer said: "Vodafone's around 5 per cent of the index but it's put on more than 15 per cent since the end of last year. The Footsie's added more than 500 points but Voda has accounted for around 50 points of this on its own. Volumes are also very light."

The blue-chip benchmark nonetheless finished up 44.42 points at 6,483.58, leaving it 1.6 per cent higher on the week. Analysts said fears over Italy's hung parliament were fading while European Central Bank president Mario Draghi's comments that policymakers were ready to consider further rate cuts had soothed nerves. Outside Europe, spirits were also buoyed by a 21.8 per cent rise in Chinese exports over the past year, suggesting global demand may be on the mend.

The strong data sent steel producer Evraz surging to the top of the Footsie risers board as the stock surged more than 5 per cent, or 14.2p, to 267.5p. Traders put the rise down to the company's small free-float – at 22 per cent among the smallest in the top flight - meaning demand can have an exaggerated effect on the share price. Other firms on the winners list included insurer Aviva, which bounced back 10p to 324.8p as investors were tempted back in after new chief executive Mark Wilson's deeper-than-expected dividend cut sent the shares skidding as much as 15 per cent on Thursday.

Rival Prudential underperfomed a rising market, however, with shares just 1p higher at 1016p ahead of results next week. "We've had mixed news from insurers and the Pru looks like a coin flip at the moment," said one City pundit.

A trio of UK banks were on the front foot, helped by the better economic news and a buy note on HSBC from analysts at Nomura, who retained their 900p target price on the bank despite it falling short of profit forecasts this week. Nomura's scribes were impressed by HSBC's strong cost-control performance, improving revenue outlook and capital position, helping the stock 18.8p up to 737p. Barclays and Asian-facing Standard Life cheered 9.1p to 318.6p and 8.1p to 381.1p. Among the losers, power supply firm Aggreko gave up 60p to 1879p as euphoria over the firm's 15 per cent dividend hike faded.

Copper miner Kazakhmys continued its dire run, down 14.5p to 532.5p. Nearly a quarter of the firm's value has been wiped out in the past seven trading sessions after the mining giant slashed its dividend by 60 per cent.

Outside the top flight, football pools operator Sportech was the biggest winner as the firm moved within sight of a triumphant £80m victory over the taxman. The firm has claimed for years that its Spot the Ball competition is a game of chance, not skill, and as such should not be subject to VAT.

An independent tax tribunal agreed, leaving Sportech in line for 17 years' worth of overpaid VAT between 1979 and 1996. The shares immediately took off, soaring 19 per cent, or 17.25p, to 108p.

Marshalls, the building supplies firm behind all the paving work at the Olympic stadium graced by gold medallist Jessica Ennis and other Team GB stars, was also in demand as it posted annual pre-tax profits of £10.4m, in line with forecasts despite a year of record rainfall. The shares ticked 4.5p higher to 110p.

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