FTSE slips lower as profit takers weigh on index

LONDON REPORT

THE top share index succumbed to profit-taking yesterday, edging back from five-year highs, though a surge in heavyweight Vodafone limited losses.

Vodafone advanced 6.8 per cent to 178.60p in brisk volume, alone adding 22.2 points to the FTSE 100 index, helped by renewed reports of a potential merger with its US joint venture partner Verizon.

The FTSE 100 ended down 4.31 points, or 0.1 per cent, at 6,427.64, having earlier risen to 6,460.96, a level last seen in January 2008. It was led lower by miners and banks, which were at the fore of the previous session's 1.4 per cent advance.

Strategists said the recent rally, which has seen the FTSE 100 rise some 22 per cent from its summer 2012 lows, could peter out, with upbeat investor sentiment running ahead of economic fundamentals.

The mood was darkened by data – albeit confirming an earlier reading – which showed economic output from the 17 nations sharing the euro fell 0.6 per cent in the fourth quarter of 2012, the biggest quarter-on-quarter fall in a year of contraction.

“We are seeing an increase in retail profit-taking across the board,” Mike McCudden, head of derivatives at Interactive Investor, said.

“How high equities can go from here remains to be seen but with investors giddy with optimism and chasing stocks higher the danger signs in this type of trading environment are all too often ignored.”

Investors were awaiting meetings from major central banks this week, with sentiment having been buoyed by assurances from US Federal Reserve officials that their stimulus programme remains in place. The Bank of England, the European Central Bank and the Bank of Japan are expected to stick with their ultra-accommodative policies at meetings this week.

Companies trading without their entitlement to the current dividend - BHP Billiton, CRH, Rio Tinto, Shire and TUI Travel – took 7.6 points off the index yesterday.

Among risers, engineering turnaround specialist Melrose advanced 2.7 per cent after it reported a 38 per cent increase in full-year profit. Admiral climbed 5.3 per cent after the car insurer posted a 15 per cent rise in annual profit and raising its total dividend by 20 per cent.

Results from insurer Legal & General saw its shares advance two per cent. It posted operating profit marginally above consensus and announced a bigger-than-expected dividend.

Mulberry shares settled after French group Hermes denied plans to make an offer for the rival handbag maker. Prior to Hermes's denial, Mulberry shares were up 8.5 per cent. By yesterday morning, the stock was flat at 1,300p.