Investors take profits after recent rally, while Mexican miner slides after production update
Markets have paused for breath after their recent good run, with Fresnillo leading the way lower.
The Mexican silver miner has fallen 43p to £17.32 after it said silver production would be stable in 2013, and confirmed it was looking to increase its 25% free float by the end of the year, to ensure it remains in the FTSE 100 after recent rule changes.
Publisher Pearson continued to fall back following Monday's downbeat trading statement, with Deutsche Bank and Jefferies both cutting their price targets. Pearson is currently 23p lower at £11.79.
Vodafone has lost 1.45p to 160.8p as Jefferies - again - reduced its target from 180p to 155p. It said:
Our 29 June downgrade was predicated on concerted competitor fight-backs threatening margin guidance and undue reliance on [its US joint venture] Verizon Wireless to sustain dividend per share growth. The third quarter management statement is likely to reveal competitive conditions worsening again. Even flat dividend per share post-2013 now looks challenging. The urgency of fixing strategic weaknesses in the core may force Vodafone to accept an unsatisfactory Verizon Wireless endgame.
Vodafone can expect ongoing dividends from Verizon Wireless but it really needs to preserve this cash to fund strategic acquisitions. There is a potentially expensive check-list of weaknesses to be addressed. Moreover there are realistic downside scenarios even to our free cash flow base case. In anticipation, it might be sensible for Vodafone to pull 2014 dividend per share expectations back a bit and indicate that it would, if possible, top up with buybacks as the cash flow position gets clearer.
Banks were weaker, not helped by talk of a possible warning from Deutsche Bank. Royal Bank of Scotland is down 5.9p at 361p while Lloyds Banking Group is 0.35p lower at 52.85p.
Overall the FTSE 100 is down 19.81 points at 6161.17, as investors decided to cash in some profits. The Bank of Japan, as had been rumoured, unveiled monetary easing, while there were positive comments from the Eurogroup meeting about Spain and Greece with a possible bailout for Cyprus in March. The US is due to vote on Wednesday on a proposal to raise the debt ceiling for three months to allow time for a full agreement. Mike van Dulken, head of research at Accendo Markets, said:
The index tried to go higher but failed - another signal that a pullback could materialise. There is the potential for a return to rising from lows at 6100, but shorter term graphs show support could emerge earlier (6120 or 6130). The Bank of Japan has pulled the trigger with Fed-style measures, but reaction from Japanese equities and the yen is muted (supports the buy on rumour, sell on fact theory). There were also positive sounds from Eurogroup meeting (money for Greece, Cyprus bailout in March). However, UK fourth quarter GDP is expected to be negative and US political division and fiscal uncertainty getting a bit more airtime.
Among the mid-caps Ocado has jumped 3.95p to 99p as it unveiled Sir Stuart Rose as its new chairman to replace Lord Grade. But analysts negative on the online grocer remained negative. Philip Dorgan at Panmure Gordon said:
Sir Stuart Rose's appointment as chairman of Ocado is a good move and should improve upon the company's previous Pravda-like external communication. It should also add to the bid chatter that has surrounded the shares in recent months. That said, Ocado is gobbling up cash and is underperforming its multichannel competitors. We don't see this changing.
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