Market report: Monday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

MOBILE phones operator Vodafone failed to connect with the sharp rise in shares being enjoyed by the rest of the stock market today, following another downgrading of its shares by one of the big City players.

Vodafone was the target of downgrades by US investment bank JPMorgan and Dutch bank ABN Amro last week. Now it is the turn of big American house Citigroup, which has cut its rating on the shares from buy to hold and slashed its 12-month target price from 145p to 124p. Today the price slipped ¼p to 110¼p - just above its low for the year.

Citigroup says the market has become 'excessively sceptical' of Vodafone's strategy and - as the key management has been thinned out - it believes its goals may not be reached as quickly as anticipated. Good news from the company has also been thin on the ground, and that is likely to remain the case for some time. The City has been left unconvinced by anything positive to emerge from the group, which remains a major area of concern.

Citigroup says: 'Vodafone is worth over 150p if it executes well, but the market needs confidence that factors such as competitive prices and regulation will not overwhelm management efforts.'

The broker doubts this will be clear this year, so 124p plus dividend seems the best that can be hoped for. JPMorgan last week downgraded Vodafone from neutral to underweight, claiming Deutsche Telekom's profits warning could mean cuts to consensus estimates on Vodafone. It has maintained its price target at 121p.

Meanwhile, JPMorgan Cazenove has downgraded BT Group, off 2¼p at 240½p, from outperform to in-line following the shares' recent strong show. It says the news from the group is likely to be mixed between now and November interims.

The rest of the equity market made a positive start to the week as investors put last week's shakiness behind them. Trading remained wafer-thin but, with the ceasefire in Lebanon appearing to hold and the oil price dropping, traders were happy to put a gloss on things.

The FTSE 100 index closed at the day's high, up 50.8 points at 5870.9. This was despite a firm start this afternoon on Wall Street, where the Dow rose 64.59 to 11,152.62.

Merchant bank and fund manager Schroder made a lot of the early running as it recouped much of Friday's losses. The ordinary shares rose 57p to 929p and the non-voting were 50p better at 871p.

Footsie newcomer Icap was 12½p higher at 462p, while food giant Unilever clawed back some of the fall that greeted its recent warning on sales. The shares rose 29p to 1219p.

Corus was down 6½p at 381¾p, brokers attributing the fall to the steelmaker's vulnerability to rising energy costs and to the spot market for steel prices. ICI dipped ¾p to 359¼p as broker Goldman Sachs raised its target from 340p to 355p after repeating its neutral rating. Goldman's move was to reflect the disposal of Uniqema to Croda for £410m in June, along with its assumption of the pension deficit.

Icelandic investor Baugur looks set to launch a £350m takeover for House of Fraser after striking a deal with pension trustees. HoF, up 4½p at 144½p, said in June that it was in talks with Baugur about an offer. The Baugur consortium includes HBOS, Icelandic bank Glitnir (formerly Islandsbanki), Icelandic private-equity house FL and Karen Millen clothing chain founder Kevin Sanford.

Baugur already owns 9.5% of HoF and has confirmed that it made an indicative bid for the department stores group of 148p. The consortium is believed to have completed its due diligence on the 61-strong chain. HoF has warned that like-forlike sales have dropped in recent months after it cut back on promotional activity.

Also in stores, Debenhams rose 3¾p to 175p after Deutsche Bank began coverage of the shares with a buy rating and 210p target. It has told clients to take advantage of the opportunity to buy a solid business that has been transformed by a new management team over the past three years.

Eckoh Technologies marked time at 13¼p on AIM despite news of a bid approach. The group, which currently boasts a price tag of £36m, last month picked up almost £11m from the sale of its stake in Symphony after it was bid 54½p by Redstone.

Food equipment maker Enodis slumped 5p to 164p after Middleby of the US pulled the plug on a proposed takeover offer hours before the deadline was due to expire.

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