Vodafone weakness weighs on FTSE

LONDON Mon Dec 17, 2012 3:07pm GMT

1 of 2. A trader monitors the screen on a trading floor in London January 22, 2010.

Credit: Reuters/Stefan Wermuth

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LONDON (Reuters) - The FTSE share index lost ground on Monday, weighed down by market heavyweight Vodafone due to concerns about the cost of the new generation of mobile phone networks.

Vodafone shed 2.7 percent, accounting for almost 8.5 points, or around a third of the FTSE 100 index's total decline after the Dutch state raised much more than expected in its auction of fourth generation (4G) frequencies, pointing to higher costs for operators.

"Friday's Dutch spectrum auction results took the market by surprise with total proceeds 2.6 times higher than anticipated and Tele2 bidding aggressively to secure all new entrant spectrum," JPMorgan Cazenove analyst Akil Dattani said in a note.

"This will raise concerns around the Dutch mobile market outlook, which we believe is negative for all operators."

Prices in the spectrum auction were so high that market leader KPN said it would have to cut dividends to afford its licences.

KPN shares dropped over 12 percent in Amsterdam.

Temporary power firm Aggreko was the biggest percentage blue chip faller, dropping 17 percent after the firm said it would be difficult to provide a definitive view on next year's trading.

"The group should deliver its forecast FY12E earnings outcome, but the outlook for FY13E is much more adverse than we expected ... Hence we expect to downgrade our FY13E EPS by circa 13 percent; we move to Hold," Investec Securities said in a note.

Aggreko had been highly valued by investors, trading on a smartestimate price-to-earnings ratio of 19.2 times, according to Thomson Reuters Starmine. That compares with ratios for its peers of around 14 times, leaving little room for disappointment.

Volume in Aggreko shares was over four times their 90-day daily average by midsession.

Overall FTSE 100 volume was relatively low at the start of the final full trading week of 2012, at around 30 percent of the 90-day daily average approaching mid-session.

At 1201 GMT, the FTSE 100 was down 20.48 points or 0.5 percent at 5,891.28, having closed 0.1 percent lower on Friday after snapping a run of six sessions of gains on Thursday.

"As long as the index holds support at 5,755 and manages to push back above (5,900) this week the odds suggest a trend continuation higher is likely. But of course a failure could turn nasty and see an immediate retreat if the Bulls fail to hold onto strength this week," Sandy Jadeja, Chief Technical Analyst at City Index said.

Strength in miners helped limit the blue chip declines, adding nearly 3 points to the index, with the sector supported by improving economic data from top metals consumer China.

Kazakhmys was the top FTSE 100 gainer up 1.6 percent after Kazakhstan revealed its refined copper and gold output rose in January-November 2012. The London-listed firm accounts for a large part of the country's metal production.

U.S. stock index futures pointed to a flat to higher open on Wall Street on Monday, following falls in the previous session a investors eyed signs of movement from Republicans in budget talks.

Republican House Speaker John Boehner edged closer to President Barack Obama's key demands in negotiations to avert the "fiscal cliff" of tax hikes and spending cuts set to take effect by Dec 31 unless Congress intervenes.

(Reporting by Jon Hopkins; editing by Patrick Graham)

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