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Vodafone's rise helps index advance

By Dominic Lau | January 6, 2009, Tuesday | Print Edition

BRITAIN'S top share index gained slightly early yesterday, extending last week's strong run, as Vodafone rose while United States President-elect Barack Obama's plans for tax cuts also helped investor sentiment.

By noon in London, the FTSE 100 gained 7.59 points, or 0.13 percent, to 4,567.71 after rising 8.2 percent in a four-session winning run last week. The benchmark, however, suffered its worst annual drop since its launch in 1984 last year, down 31.3 percent.

Index heavyweight Vodafone extended a recent strong run after Credit Suisse upgraded the mobile phone group to a "trading buy" on New Year's Eve.

"We had a bit of a bounce towards the end of the year. After all you can argue that we have quite a bit of overreaction through parts of last year," said Howard Wheeldon, a senior strategist at BGC Partners. "But none of the euphoria takes away the issues that we have to face this year. Perhaps we are overdue this temporary bounce."

Investor sentiment was also boosted by news that United States President-elect Obama is seeking as much as US$310 billion in tax cuts as part of a massive stimulus plan to tackle the financial crisis.

Prime Minister Gordon Brown said the British government was talking to lenders about stepping up loans to credit-starved companies, but a second bailout of banks was not the preferred option.

Vow to fight

Officials from the US Federal Reserve and the European Central Bank on Sunday vowed to fight the damaging effect of deflation as the global economy enters a deep and possibly lengthy recession.

Banks were generally weaker, with HSBC, Royal Bank of Scotland, Lloyds TBS and HBOS down. But Standard Chartered and Barclays headed higher.

Deutsche Bank said in a note earlier that it had cut its 2009 earnings per share forecasts for Barclays, HSBC, RBS and StanChart by 12 percent to 72 percent.

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