London Report: Syria fears and Vodafone deal dampen FTSE

BRITAIN’S top share index fell yesterday, weighed down by telecoms giant Vodafone disappointing with the terms of a sale deal with partner Verizon and by fresh speculation about a US-led attack on Syria.

Vodafone was among the most heavily traded stocks at three times its daily average. It fell five per cent, knocking 20 points off the FTSE 100.

In all, the FTSE 100 fell 37.8 points, 0.6 per cent, having extended losses in late trade after John Boehner, the Republican speaker of the US House of Representatives, said he would support President Barack Obama’s call for military action in Syria and urged his colleagues in Congress to do the same.

Global stock markets have been jittery in the past week as the prospect of an international conflict in the oil-rich Middle East unnerved investors, although traders cautioned any action was unlikely before a US Congress vote later this month.

“Boehner ... has been at loggerheads with Obama on everything – so this is significant,” a senior trader in London said. “The next thing to watch for is Congress being recalled early. If Obama is sure they have the numbers then Congress will be recalled.”
Reports of missiles heading towards the Eastern Mediterranean – which later turned out to be part of a US-Israeli test – had briefly sent the FTSE to an intra-day low of 6,456.95 points.

Volume on the FTSE, which had been low for most of the day, surged in late trade to close at three per cent above the index’s average for the last three months.

While the deal with Verizon would allow Vodafone to return $84bn of the net proceeds of the deal to shareholders, the division of that payout between shares and cash is capped.

“The cash element of the payout is probably less than expected,” Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said.

“For shareholders there is also the strange situation that, while Vodafone has cut ties with Verizon, they [the investors] haven’t, so some of the institutional shareholders could be taking this early opportunity [to cash in], especially if they can’t hold US stocks in their portfolio.”

Simon Maughan, strategist at Olivetree calculates the payout structure means Vodafone shareholders will not benefit from any strength in Verizon’s shares until the stock has rallied 7.6 per cent, while they wear most of the potential downside.