Vodafone helps drive UK's FTSE higher
International / 08 Jan '13, 2:47pm
Britain's top share index moved back up on Tuesday towards recent two-year highs, helped by gains from UK market heavyweight Vodafone.
Vodafone firmed 2.6 percent, adding almost 8 points to the UK benchmark, after its partner in US joint venture Verizon Wireless said it would be “feasible” to buy out the British firm's stake in the business in what would be one of the biggest corporate deals ever.
Verizon Communications Chief Executive Lowell McAdam told the Wall Street Journal “we have always said we would love to own all of that asset”, which is 55 percent owned by Verizon Communications and 45 percent by Vodafone.
“There has been much negative news on VOD given the tough outlook for European telecoms ... due to the macro environment but forward looking we see (it retesting) 191 pence,” Atif Latif, director of trading at Guardian Stockbrokers, said.
“Should (Verizon Communications) make a move on the 45 percent stake, we see value on a standalone basis, and with the shares offering a prospective yield of 7 percent coupled with the defensive nature of the company we see the current valuation as undemanding.”
Trading volume in Vodafone was robust, at 88 percent of its 90-day daily average.
The FTSE 100 was up 16.00 points, or 0.3 percent, at 6,080.58 by 14:13 SA time, resuming a rally which took it to its highest closing level since early February 2011 on Friday, having slipped on Monday for the first time this year.
“It's looking good ... it's gaining ground and holding that ground - that's got to be encouraging,” Barclays Capital's chief European technical strategist Phil Roberts said.
“We're coming up now to the February 2011 high (6,105). I think it's going to break that ... after that you've got to start thinking about the 2007 highs (6,754).”
Heavyweight mining stocks weakened before economic data releases this week and next from China, the world's top metals consumer, including fourth-quarter GDP.
Societe Generale, in a note, said it reckons a hard landing in China remains a real risk despite recent signs of economic improvement.
SocGen recommends playing this possibility by selling European miners, as well as the tech hardware and personal goods sectors - which also have high exposure to Asia - while buying into media and food retail.
Investors were also cautious before the fourth-quarter US earnings season which, as usual, kicks off with figures from aluminium firm Alcoa after the London close on Tuesday. - Reuters