Disappointing end to the week for the FTSE (with video)

Jul 25 2008

A recent rally for top-flight stocks ran out of steam this week as sentiment was hit by more disappointing economic news.

The FTSE 100 Index gained more than 2% in the previous week after better than expected US banking results, but lost some ground after falling retail sales and a further slowdown in economic growth to 0.2% between April and June - the lowest for more than three years.

Meanwhile Bank of England minutes also showed one rate-setter actually voting for higher interest rates due to inflation concerns despite the faltering economy. Over the week the Footsie shed 23.8 points to 5352.6, or 0.4%.

Mobile phone giant Vodafone suffered a setback after warning on Tuesday of revenues at the bottom end of its hopes this year.

The firm spooked investors who thought the company recession-proof after weaker trading in the UK and Spain, as well as lower sales of handsets and USB data cards in the three months to June 30.

Vodafone shares fell 16% at one point - wiping £11 billion off its market value. The firm launched a £1 billion share buyback a day later but the stock finished the week 12.6% lower at 132.9p.

Nuclear power firm British Energy enjoyed a better week as speculation over an imminent £12 billion takeover by French giant EDF grew on Thursday.

A deal could be announced as soon as next week following the long-running takeover saga over BE, which has eight nuclear plants and one coal-fired station.

EDF is reportedly planning to sell a minority stake in the firm to British Gas parent Centrica on completion of the deal. BE was 3.8% higher over the week at 726.5p.

Enterprise Inns endured a difficult time after it said falling beer volumes and increased assistance to struggling landlords had “inevitably put some pressure” on earnings.

The group also bemoaned Government alcohol duty hikes and cheap supermarket drink sales alongside the smoking ban for the tougher trading conditions.

Solihull-based Enterprise was 7.9% lower at 317.75p over the week. But in the FTSE 250, Mitchells & Butlers - which has gained market share as more customers opt for cheaper pub meals - was ahead 5.8% at 264.75p.

Buy-to-let mortgage lender Paragon’s shares jumped on Tuesday after it said it was holding “exploratory” talks with parties interested in buying the company.

Private equity firms TPG Capital and Blackstone were among the firms rumoured to be interested, as buyout companies look for bargains among battered mortgage lenders.

Paragon’s stock has suffered heavily in the past year but it believes tenant demand will continue to improve in an uncertain housing market. Over the week the firm soared 27.6% to 105p on the takeover hopes.