Vodafone Drops 14%, UK Stocks Struggle

123jump.com Staff
22 Jul, 2008
New York City

After choppy trading, stocks in UK closed lower on a weakness in energy, mining and financial sectors. Crude oil futures dropped for the second week in a row and is now nearly $20 a barrel lower from its record $147 level. Vodafone Group dropped 14% after it indicated annual revenue at the low end of its estimate. Cairn Energy led the FTSE 100 index gainer with a rise of 6% and Vodafone led the decliner.

[R]1:00PM New York, 6:00PM London - U.K. Treasury and the Bank of England look for ways to expand their power. Mining and energy companies fell on weak commodities prices.[/R]

Stocks in London fell on bearish earnings outlook from Vodafone and after the fourth largest U.S. bank Wachovia reported a loss of $8.9 billion, or $4.11 per share, in the second quarter.

In London trading FTSE 100 dropped 0.74% or 40.2 at 5,364.10.


Of 102 FTSE 100 stocks 46 rose, 54 declined, and 2 were unchanged. Cairn Energy led advancers in the index shares with a rise of 6.23% followed by Lonmin Plc gaining 5.18%.

UK Treasury Look to Expand Powers

The UK Treasury reported on its Web site that the Chancellor of the Exchequer Alistair Darling today launched a consultation on the “special resolution regime” to reduce the impact of a failing financial institution from spreading to the whole economy. The Bank of England and UK Treasury are looking to expand their powers in the times of ‘crisis’ to take faster decisions.

Alistair Darling said, “No system of regulation can or should prevent the failure of each and every firm, but we must do everything possible to reduce the impact of problems which could pose a wider threat to stability. The challenge is to ensure that the Authorities can act quickly and decisively to take appropriate steps to resolve failing banks. These proposals for a special resolution regime give the Authorities the full range of powers they need.""

Separately, Bloomberg news reported that the Bank of England Governor Mervyn King told lawmakers in a testimony at the Treasury Select Committee that he wanted the central bank to wield more influence in making decisions.

UK Tax Authorities Probes Wealthy

The Financial Times reported today that the tax authorities are investigating about 300 wealthy Britons who prejudiced the country of £1billion in the tax haven of Liechtenstein.

Gainers & Losers

Cairn Energy led advancers in the FTSE 100 stocks with a rise of 6.23% followed by increases in Lonmin Plc of 5.18%, in Cadbury Plc of 4.90%, in Carnival of 4.81%, and Sainsbury of 4.64%.

Vodafone led decliners in the FTSE 100 index shares with a fall of 13.57% followed by losses in Enterprise Inns of 13.38%, in Friends Provident of 6.64%, in Carphone Warehouse of 5.53%, and Ferrexpo of 5.16%.

Vodafone fell after the company reported in its interim management statement that revenue for the year is likely to be around the bottom of the £39.8 billion to £40.7 billion on recent economic weakness and lower than expected equipment revenue.

Ferrexpo declined after the company said output of iron ore declined 1% in the second quarter.

Financial stocks also slumped after the fourth largest U.S. bank Wachovia Corp reported second quarter loss of $8.9 billion significantly higher than the recent estimate of $2.8 billion. American Express also reported a sharp drop in profit and issued a weak outlook. Old Mutual shed 3.81%, Royal Bank of Scotland declined 1.97% and Barclays fell 2.85%.

Europe Markets Review

In London FTSE 100 Index closed lower 40.20 or 0.74% to 5,364.10, in Paris CAC 40 Index increased 0.12 or 0.00% to close at 4,327.26 and in Frankfurt DAX index higher 17.95 or 0.28% to close at 6,442.79. In Zurich trading SMI increased 64.03 or 0.93% to close at 6,922.25.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 381.26 or 2.98% to 13,184.96, Hang Seng index in Hong Kong decreased 5.42 or 0.02% closed to 22,527.48. ASX 200 index in Australia decreased 6.20 or 0.12% to close 5,005.60. The KL Composite index in Malaysia increased 6.09 or 0.55% closed to 1,109.57.

The Kospi Index in South Korea decreased 1.69 or 0.11% to close at 1,561.23, SET index in Thailand closed lower 5.15 or 0.75% to 682.15 and JSE Index in Indonesia increased 17.69 or 0.81% to 2,212.75. The Sensex index in India increased 254.16 or 1.84% to 14,104.20.