London shares sharply lower in opening deals

Leading shares plunged in opening deals, dragged lower by TMTs, heavyweight drugs and oils after precipitous falls on Wall Street last night, with only a handful of defensively positioned stocks registering a gain, dealers said.

They added that trading activity is likely to come to halt at 12.30pm when England kicks off against Argentina.

At 8.37am the FTSE 100 was down 63.50 points at 4,894.10, having ended 31.5 points lower yesterday at 4,957.6. The wider indices were also sharply lower.

Volume was swollen by trading in Vodafone. By 8.37am 203 million shares had changed hands in 8,156 transactions.

Overnight on Wall Street, the DJIA closed 172.16 points lower at 9,624.64, while the Nasdaq composite index shed 40.38 points to end at 1,554.88.

In Asia today, the Nikkei 225 index ended 173.27 points lower at 11,401.67 as Intel's warning offset news Japan has officially come out of recession.

In Hong Kong the Hang Seng finished its morning session 78.31 points easier at 11,302.46.

On the domestic economic front, May's UK service sector PMI is expected to show a slight improvement, building on April's 54.5 point reading.

But the latest US employment report will dominate the agenda, although it's timing - in the middle of the England vs Argentina game - may limit its impact.

Economists expect non-farm payroll employment to rise by 44,000 in May after rising 43,000 in April. The unemployment rate is expected to tick up to 6.1% from 6.0%, its highest level since July 1994. Average weekly earnings are expected to rise 0.3% following a 0.1% rise in April.

US April consumer credit numbers will also be unveiled at 3.00 pm BST, and this is expected to expand by $6.1bn (€7.2bn) in April, after rising 4.6 billion in March.

Tech stocks led the blue-chip fallers in opening deals as a sales warning from bellwether tech company Intel last night crushed already fragile sentiment.

Chip designer ARM Holdings, down 15-1/2 pence at 157, and software and services firm Logica, down 14 pence at 201, look set to exit the FTSE 100 on current form.

Mobile phone giant Vodafone fell 4-1/2 pence to 92-1/4 following news overnight that shares in AirGate slumped 67% after the Sprint PCS reseller cut its subscriber growth rate target for the third quarter.

Heavyweight drug stocks remained out of favour, mirroring a dispiriting performance overnight by their US peers. Yesterday Merck & Co said it will change the labels of its popular cholesterol drug Xocor to reflect increased risks and Bristol-Myers fell amid concerns about its legal liabilities after it was sued by 29 states for alleged overpricing of its Taxol breast cancer drug.

Elsewhere in the sector, Shire Pharmaceuticals slid 6 pence to 582 ahead of an expected trading update today, with news on a key drug Fosrenol awaited.

In financial services insurer Royal & Sun Alliance fell 8-3/4 pence to 269-1/4, not helped by the Financial Times reporting that the insurer will be fined for pensions mis-selling, it has been told by the Financial Services Authority.

In the energy sector heavyweight oil stocks extended yesterday's falls, save BG Group, up 3-1/4 pence to 291-3/4 ahead of today's AGM.

The other minority blue-chip gainers comprised a selection of defensively positioned stocks: Tobacco firm Gallaher topped the risers with a 8-1/4 pence to 630-1/4, while National Grid gained 2-1/2 pence to 493-1/4 and Powergen rose 2 pence to 768.

But today's meagre company news was received with tepid enthusiasm. Mid-cap sugar group Tate & Lyle gained a penny to 345 after releasing better-than expected full year results, adding it has "increased confidence" over current year prospects.

Hopes for consolidation in the travel sector in the wake of the EU's decision yesterday to overrule the decision to block Airtours' bid for First Choice continued to provide some direction. First Choice gained 0-1/2 pence to 105.

Plasterboard firm BPB rose 3 pence to 382 after UBS Warburg repeated its 'buy' advice up to 420 pence.

Selected tech small caps suffered in early deals. Harrier Group slumped 11 pence - a loss of 45% - to 13-1/2 after the networking security firm warned it expects turnover for the current year to be below expectations and that it will incur a trading loss in the first half of the current year.

Elsewhere on the downside BSoftB down 2-1/2 pence at 15 with investors unimpressed by narrowing interim losses and the company's plans to use its AIM listing and its remaining cash to fund an acquisition.

Meanwhile business information company WMRC lost 1-1/2 pence to 10-1/2 despite narrowing losses and reducing cash outflow.

Investors Chronicle 'buy' advice provided an early boost elsewhere. Telford Homes was marked up 1-1/2 pence to 84, while Richmond Foods gained 4 pence to 407-1/2 and Dobbies Garden Centres rose 1-1/2 pence to 515.

Elsewhere on the upside household and personal care products firm McBride advanced a penny to 56-1/2 in response to an upbeat statement and joint venture settlement news.

The company's Robert McBride unit has reached settlement of a put option on a 50% stake in its joint venture with Nichol Beauty Products Ltd, Aerosol Products, for £12m (16m). The exercise of this put option will result in a goodwill write off of £16m (€21m).

McBride also said today that trading in its core household and personal care businesses continues to improve.