Reuters: Hot Stocks: Vodafone drags down UK FTSE on payout disappointment

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Vodafone drags down UK FTSE on payout disappointment Sep 3rd 2013, 11:31 Tue Sep 3, 2013 7:31am EDT * FTSE 100 down 0.1 pct to 6,499.89 pts * Reports of missiles in Eastern Mediterranean briefly unnerve investors * Vodafone falls as details of joint venture sale fuel profit taking * Miners and banks higher after Chinese PMIs By Francesco Canepa LONDON, Sept 3 (Reuters) - Heavyweight Vodafone, the UK's fifth largest stock by market capitalisation, led British shares lower on Tuesday after the terms of its sale deal with U.S. partner Verizon disappointed some investors. Vodafone was the biggest drag on the FTSE, falling 3.6 percent and knocking 14.8 points off the index. The telecom firm had said the deal with Verizon would allow it to return 71 percent of the net proceeds of the deal - or $84 billion - to shareholders, but the division of the return to shareholders between shares and cash is capped. "Shareholders are only compensated for a small amount of potential Verizon weakness, yet don't benefit from any strength until Verizon has rallied 7.6 percent," Simon Maughan, strategist at Olivetree, said in a trading note. "This means VOD shareholders lose out on a meaningful amount of VZ potential upside but wear most of the potential downside, we model this as costing VOD shareholders some 3.3p," he said. The announcement fuelled profit taking after a 12 percent rise since Thursday. The FTSE 100 index was down 6.30 points, or 0.1 percent at 6,499.89 points, but bounced off a session low of 6,456.95 after investors were briefly unnerved by reports of missiles heading towards the Mediterranean, heightening concerns that the United States was preparing to attack Syria. The index turned sharply lower after Russia said it detected the launch of two ballistic "objects" in the Mediterranean Sea but Israel later said it had carried out a joint missile test with the United States. Crude futures slightly extended gains to trade at nearly $115 on concerns about supply from the oil-rich Middle East, but they remained well below highs of $117 hit last week, when a U.S.-led attack appeared imminent. Traders said they did not expect any attack to happen before the U.S. Congress is due to debate the matter on Sept. 9. "This news story rattled the market and the FTSE did sell off a little bit," Andy Ash, head of sales at Monument Securities, said. "You have to look at the reaction on the main markets and certainly oil didn't really move. I really can't see who would be launching an attack right now. It's next week's story." Growth-sensitive sectors including miners were among the top gainers, after China's services sector grew steadily in August as domestic demand picked up, official data showed on Tuesday. "With Chinese data encouraging, we remain optimistic for the market in terms of absolute growth," said Atif Latif, director at Guardian stockbrokers, who expected the FTSE to push to 6,875 points, a high tested in May and previously seen in 1999. (Additional Reporting By David Brett; editing by Stephen Nisbet) Link this Share this Digg this Email Reprints

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