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FTSE down as Vodafone effect, Dow cast shadow

LONDON: The UK's FTSE 100 index fell to its second lowest close of the year so far on Tuesday, as investors sold a number of heavyweight, liquid blue chips and boughtt performance after Monday's holiday.

"I expect us to head lower again tomorrow," one dealer said, pointing to the early trend in New York where the Dow Jones was 0.9 percent down and the Nasdaq 2.5 percent off at the Danish market's close.

Slightly lower crude oil world market prices and a clearly softer dollar weighed on shipping and oil group A.P. Moeller's shares, which led Tuesday's losses on the KFX top-20 index.

The dollar weakened to 7.40 against the Danish crown, which is pegged to the euro in a tight fluctuation band, from 7.54 on Monday and 7.65 at the beginning of February.

National telecoms operator Tele Danmark edged two crowns up to 655 on the eve of the release of its 1999 results, forecast by analysts to show a 14 percent rise in operating profit.

Rival GN Store Nord fell 10 crowns to 530 while the Dow Jones EuroStoxx telecoms sector index rose 1.8 percent.

Novo Nordisk world leader in diabetes care products, gained one crown to 1,070, defying a 0.6 percent decline for its peers in a European pharmaceuticals index.

Brewer Carlsberg fell almost four percent to 241 crowns after an initial surge to a five-week high of 270 crowns on the back of above-forecast first-quarter profits.

Computer software maker Navision recovered partly from an over six percent intra-day fall but closed 4.2 percent down at 790 crowns against a backdrop of wildly diverging price targets and investment recommendations by different analysts.

The first heavyweight banking group to report 1999 earnings, Unidanmark UNIDa.CO due on Wedneaday, saw its shares ease two crowns to 450.

Fourth-biggest Jyske Bank's pre-tax profit, up 80 percent, was in line with expectations. Its stock ended flat. Dealers were surprised by the consistent selling, pointing out that banks, and other cyclical and defensive stocks were looking increasingly good value in relation to fashionable growth stocks.

"No one seems to want to know about certain areas of the market while this 'new econony versus old economy' scenario continues," said a senior sales trader at a leading U.S. investment bank.

"The trend is your friend as the saying goes, and people are sticking by that for the time being."

For all that, media stocks could not escape index-trackers' need to raise cash for Vodafone. Pearson dropped 8.1 percent, while pay-TV group fell 5.6 percent and EMI Group slipped 3.2 percent.

Mining stocks were also dumped, with Billiton sliding 10.2 percent, Rio Tinto 5.6 percent and Anglo American 5.9 percent. Elsewhere among the leading 100 stocks, food retailers Tesco and J.Sainsbury both dropped as much as 4.9 percent after the UK anti-trust watchdog said that supermarket chains could be forced to divest stores if it found evidence the industry was acting against the public interest.

However, Unilever provided a shaft of light, rising 1.5 percent after unveiling a restructuring plan which should lead to turnover growth of five percent to 2004.

The FTSE 100 once again underperformed its European counterparts on Tuesday, a pattern which has been ongoing for some weeks, analysts said.

Salomon Smith Barney equity strategist Jonathan Stubbs said the more visibly aggressive interest rate policy in the UK and the strength of sterling had prompted much of the relative weakness.

But he said the possibility of an influx of money through Individual Savings Accounts (ISAs) as the end of the tax year approached could support the UK index in coming weeks.

"This is not tried and tested but ISAs could provide a boost for the market in the short-term," Stubbs said.

From a chart viewpoint, Investment Research of Cambridge technical analyst Richard Marshall said the FTSE 100 index was finding support at 6,000. He added the index needed to close above the previous rally high of 6,209.3 to break the downtrend extending back to last December.-Reuters