Vodafone shares weigh after results FTSE falls 49pts

The FTSE 100 fell 49pts by close to 1pm with the UK Index weighed down by losses in Vodafone’s shares after the telecommunications giant reported slowing growth and selling in financial stocks.

7th week of consecutive gains?
It’s been a bearish end to the week but if the FTSE 100 can retain above the 5666 level, it would mark a seventh consecutive weekly close higher, which would be the best period of consecutive weekly gains for the FTSE in 7 years. There is a danger in this however in sending out a somewhat misleading message that equity sentiment is overriding strong. This is not true. What we have seen however is investors buying into the global stimulus story, as recent moves by the ECB, BoE and PBOC has testified. The lack of movement from the Federal Reserve apart from the extend Operation Twist is keeping investors interested in stocks for now, but it is debatable whether investors will have enough patience to wait for the Fed to move, if the refrain from doing so until later this year.

Vodafone see’s slowing growth
The earnings from Vodafone has taken much of the focus in trading in London today. The stock has a heavyweight bearing on the FTSE 100 and so as such, we can correlate some portion of the FTSE’s 30pt fall to a 2% drop in Vodafone’s share price.

Vodafone saw revenue growth slow 0.6% to £9.98bn from a previous quarterly growth of 2.3%, marking a significant slowdown and echoing investor concerns over global growth. Revenues missed forecasts of a slowdown in growth to 0.9%, and it is this disappointment, as well as marked slowdowns in Southern Europe and Emerging Markets such as Turkey and India that is hurting near term sentiment in Vodafone’s shares.

Equity losses gather pace
The afternoon saw equity markets turn more bearish with the Spanish IBEX and Italian MIB indices falling a heavy 3.5%. Much of the losses were weighted in financial stocks, which continue to fall and reflect concerted moves in bond markets where Spanish 10yr bond yields rose back above 7% and Italian 10yr above 6% levels. There was also a notable increase in the Volatility Index (VIX) today, with the FTSE equivalent VIX rising 5%.

Resolution Shares fall 8%
Resolution shares fell 8.4% after the firm cancelled plans for a £250m share buyback. The firm originally announced in March that it was delaying the buyback and investors were expecting to see it re-installed before August, but today’s announcement has taken that likelihood off the table as the company looks to preserve cash.