Vodafone, banks drag FTSE lower; commodities gain

Tue Jul 22, 2008 4:36am EDT
* FTSE 100 falls 1.4 pct to snap 3-day winning streak

* Vodafone slumps after trading update

* Banks slip; oil, mining shares track firmer commodity prices

By Atul Prakash

LONDON, July 22 (Reuters) - Britain's blue-chip FTSE index fell 1.4 percent on Monday, as a sharp drop in Vodafone shares and weaker banking stocks outweighed commodity sector gains.


By 0806 GMT, the commodity-heavy FTSE 100 .FTSE was down 72.7 points at 5,331.6, after closing 0.5 percent higher on Monday. The index, which had risen for the past three sessions, has fallen more than 17 percent this year.

Vodafone, world No. 1 mobile phone company by revenue, topped the FTSE 100 losers list by slipping 12 percent after it said full-year revenue was expected to be around the bottom of its previously stated range due to economic weakness.

"It's not a good day for European mobile," one London-based analyst said.
"European mobile is saturated, it's harder to show top line progression. Top line is now under pressure, and Vodafone is obviously the benchmark for European mobile," the analyst said.

Banking shares also slipped on concerns about a tough economic outlook and tight credit market conditions.

Macroeconomic research consultancy Capital Economics said UK banks may be forced to rein in lending by as much as 180 billion pounds, the equivalent of 13 percent of economic output, to shore up their balance sheets, the Daily Mail reported.

"We had some reasonably reassuring comments from some of the U.S. banks in recent days, but it's difficult to say that all of the difficulties in relation to the credit market are behind us," said Keith Bowman, analyst at Hargreaves Lansdown.

"I am sure we are going to be results-driven in the next few days," he added.

HBOS, the latest European bank to raise capital to repair its balance sheet, fell 1 percent, while Royal Bank of Scotland , Barclays , HSBC , Lloyds TSB and Standard Chartered fell between 2 and 4.2 percent.

COMMODITIES GAIN

But commodities shares advanced, tracking a rise in crude oil and metal prices.
BP , Royal Dutch Shell , BG Group , Cairn Energy and Tullow Oil all advanced.

Higher metals prices gave a lift to mining stocks, with BHP Billiton , Anglo American , Vedanta Resources , Lonmin , Xstrata , Antofagasta , Eurasian Natural Resources and Rio Tinto up between 0.8 and 2.4 percent.

Platinum specialist Johnson Matthey rose 4.4 percent to top the FTSE 100 gainers list after it said it had made a strong start to the new financial year and expected first half profit to be "well ahead" of the same period last year.

Enterprise Inns fell 8.5 percent after Britain's second-biggest pubs group said earnings had come under pressure in the first 42 weeks of its financial year due to a continuing fall in beer sales. (Additional reporting by Dominic Lau; Editing by Louise Ireland)