London shares weak as Wall Street meanders

Leading shares remained weak but were off their worst levels in cautious midday trading, aided by a Wall Street opening which, while directionless, was slightly better than had been previously indicated, dealers said.

Leading shares remained weak but were off their worst levels in cautious midday trading, aided by a Wall Street opening which, while directionless, was slightly better than had been previously indicated, dealers said.

But attention remained focused on the meeting of the US Federal Reserve's FOMC tomorrow, at which many expect interest rates to be shaved by further 25 basis points, they added.

At 3.20pm the FTSE 100 index was down 59.2 points at 5206.1, rallying back from its midday low of 5,172.2.

All other indices had narrowed losses but remained in negative territory, while volume remained slower than usual with 1.2 billion shares changing hands in 92,640 transactions.

Meanwhile, the DJIA was up 14.61 points to 10,064.33 and the Nasdaq composite advanced 12.33 points to 2,033.59.

Technology issues were among London's weakest features, with sector sentiment knocked by talk that France Telecom and Finmeccanica were having trouble placing their equity stakes of ST Microelectronics, Europe's biggest chipmaker.

The two announced this morning that they were selling up to 11% in the chipmaker through a private placement of equity and exchangeable bonds. And while the exchangeable bond was up to six times oversubscribed, demand had faltered amid reports that France Telecom is prepared to sell its remaining 25 million shares next year.

ARM Holdings, the UK's only top-line microchip stock, fell 16-3/4 pence to 381-1/4, while the weak trend encouraged profit taking in other stocks such as Invensys, down 6-1/2 to 122.

Telecoms issues also came under renewed pressure. ABN Amro 'reduce' advice led mmO2 down 1-3/4 to 89-1/2, while Vodafone dropped 5-1/4 to 184-3/4 as it denied a Sunday Times article claiming that it is close to agreeing a new revenue-sharing deal with Vizzavi.

Defensive stocks were the theme amongst the blue-chip index's few risers.

AstraZeneca added 36 to 3195 and Rentokil gained 1-1/4 to 260-1/4, both supported by share buy-backs, while International Power jumped 3/4 to 201-1/2 after receiving a £5m interim dividend payment received from its holding in Hub Power.

Meanwhile, British Airways was steadied by confirmation that it is in talks to sell Boeing 767 aircraft to the Tanker & Transport Service, a consortium headed by Boeing and BAE Systems which is bidding for the Ministry of Defence's Future Strategic Tanker Aircraft programme. No value was mentioned, although the weekend press had speculated on a fleet value of around 600 million. Shares showed a 1/4 pence gain to 224.

Publishers and media stocks were among the biggest drags on the London indices following a warning from Trinity Mirror of a continuing poor advertising outlook.

Financial Times publisher Pearson led the blue-chip fallers with a 46 pence reduction at 847, while WPP dropped 15 to 733 in sympathy, as did Granada, down 4-1/2 to 144-1/4. Reuters also lost 25 pence to 743.

Reuters reduced 20 to 748 amid speculation that chairman Christopher Hogg will stand down in 2002 - even though he is expected to delay his departure to make sure the new management under chief executive Tom Glocer has a successful transitional period.

Trinity Mirror, a second liner, shed 11 to 411-1/2 after warning that, on its three national titles, the outlook for advertising in December is similar to November.

Advertising conditions worsened after the Sept 11 terrorist attacks on US cities which led the group to report a decline for the third quarter of 1.3%.

This has continued into the fourth quarter, with declines of 10.1% and 20.7% in October and November respectively, said the company in a trading update covering the six months to December 30.

It was Aggreko which led the mid-cap fallers, with a drop of 47 to 353-1/2 after a cautious outlook statement and a shock resignation at the power rental group.

Aggreko - which receives over half of its revenues from the US and has contracts to provide power for next year's Salt Lake City Winter Olympic Games in Utah - warned that demand had slowed in the second half, with problems escalating following September 11.

Another reason for the sharp losses in the share price was the shock resignation of well-respected executive chairman, Chris Masters, according to analysts. He has led the group since 1997, when it let go of its parent's apron strings and, there is some uncertainty about how the change of management will affect the business.

Merrill Lynch downgraded its intermediate rating to "reduce/sell" from 'neutral' in reaction, saying the valuation is demanding given forecast EPS growth of only 7% in 2002. The US brokerage also cut its 2001 and 2002 EPS forecast by 3% and 7% respectively.

Elsewhere on the second line, Oxford GlycoSciences added 15 to 635 after Lehman Brothers reiterated its 'strong buy' stance and 1700 pence target.

Hopes of a clutch of new contracts provided a boost to Regus, 3-1/2 firmer at 60-1/2, while buying ahead of Wednesday's interims lifted Eidos 4-1/2 to 230. On the downside, news that Norman Lessels is to stand down from Cairn Energy as chairman at the company's in May 2002 rattled confidence in the group, sending shares down 16 to 243-1/2, while Stagecoach lost 3-3/4 to 70-1/4 as UBS Warburg scaled its target on the transport operator to 77 pence from 97.

Otherwise, technology issues continued to weigh.

Colt Telecom dropped 10 to 148-1/2 with the weak telecoms trend, while announcing it has raised the expected £494m in a share issue backed by its biggest stakeholder, the fund manager Fidelity. The operator said shareholders subscribed for 633 million shares under the terms of the offer, short of the 649 million available, although Fidelity took up the remaining 16 million at the agreed 62 pence per share.

Telewest was off 4-1/2 to 70 after its US-listed closest peer NTL said it will cut 2,000 jobs in the UK as part of a series of cost-cutting measures. NTL also announced a pay freeze for managers, a review of all operating and capital expenses, and a review and removal of all non-essential consultants and contractors.

Equipment manufacturers were also under pressure, with Marconi 2.30 lower at 42.70 following a profit warning from error-prone North American fibre-optic giant JDS Uniphase. News of Marconi's five-year, $80m networking supply agreement with Texan-based broadband service provider, Grande Communications, failed to inspire.

Celsis International continued to lead the smaller caps with a gain of 4 to 16-1/4 after it reacted to press speculation by saying it is at the early stages of a review of strategic options, including a possible sale of the company or a division. The Times had this morning reported the group may looking for a trade sale.

Berry Birch & Noble was also supported after it posted details of its £47.75m reverse takeover of Berkeley Financial Services Group. Shares, which restarted trading this morning after a suspension, surged 27 to 110.

Elsewhere, Wealth Software was up 2 at 12-1/2 after announcing it has won software orders from CoFunds and Goy Harris Cartwright, together valued at £749,000.

Medical Marketing International was also in demand, gaining 11 to 63-1/2 after forming a partnership with Scottish Enterprise to establish a business incubator facility on the Alba Campus in central Scotland, leading the creation of around 500 jobs.

On the downside, HP Bulmer faded 64-1/2 to 357-1/2 in reaction to an interim profits setback.

The group said the first half was hit by a combination of poorly performing international operations and a one-off supply chain issue, as it revealed that it now expects profits for the full year to be broadly in line.

Profit before tax, goodwill and exceptionals fell 17.8% to £13.5m from £16.5m and pretax profit after exceptionals and goodwill plunged to £4.12m from £12.45m in the first half.

Dating agency OneSaturday was off 1/2 at 3 ahead of its interims tomorrow, as was Landround, which saw its shares drop 11 pence to 102-1/2.

Video compression software group Emblaze was another tech casualty, dropped 19 to 170 after it warned that delays to contract negotiations may lead to revenues for the year being substantially below market expectations which may generate a greater loss than expected.

The major contributing factors to this delay to contracts are related to the global slowdown in capital spending by telecommunication carriers worldwide, combined with the late arrival of video enabled handsets, said the Israeli-based group.

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