FTSE flounders as Vodafone and retailers fall

By Sudip Kar-Gupta

LONDON (Reuters) – Sell-offs in mobile operator Vodafone and retailer Marks & Spencer dragged down Britain’s blue-chip equity index on Tuesday, after disappointing forecasts from both companies.

The benchmark FTSE 100 index closed down by 0.6 percent, or 42.55 points, at 6,802.00 points.

Vodafone took the most points off the FTSE as it fell by 5.5 percent to 205.30 pence after it said core earnings would decline in 2015 due to investment spending needed for its business.

Analysts at Societe Generale said the company’s results were lacklustre, but Strand Capital managing director Kyri Kangellaris said Vodafone was a stock worth buying on the dip.

“There’s no doubt that it’s still a good company in the long run. I’d look to pick some up if it fell down to the 200 or 195 pence level,” he said.

Clothing and food retailer Marks & Spencer also fell 1.1 percent after it warned that a new website would take four to six months to “settle in”, affecting the performance of its general merchandise business in the three months to end-June.

The fall in M&S impacted the shares of rival High Street retailers, with Tesco falling 1.9 percent while WM Morrison declined by 2.1 percent.

The FTSE 100, which is up by roughly 1 percent since the start of 2014, hit its highest level in more than 14 years last week but has since slipped back.

Hantec Markets analyst Richard Perry said the FTSE was beginning to stall after last week’s run-up, while Intertrader chief market strategist Steve Ruffley added the FTSE needed to break and hold above 6,900-7,000 points to re-ignite the rally.

“We have failed to break 6,900 but more importantly have not tested 7,000 points. If we are going to see a continued rally, then the psychological and historic 7,000 must be broken,” said Ruffley.

(Additional reporting by Francesco Canepa; Editing by Jeremy Gaunt and Susan Thomas)