LONDON SINKS FURTHER ON RETAIL LOSES
Copyright 2002 www.ft.com

[ January 8th 2002 ]

London blue chips extended losses as US markets opened flat on Tuesday, with investors taking profits in retail stocks. Tech stocks also moved further south, handing back more of the gains made over the Christmas period.

The FTSE 100 traded 0.5 per cent lower at 5,270.4 and the FTSE Techmark was 1.3 per cent lower at 1,523.7.High-street retailers led the decliners, with electronics chain Dixons, clothing store Next and Argos-owner GUS all falling about 3 per cent as investors took profits in the sector after a strong run in 2001.Next reported total sales, including new stores opened during the year, rose 22 per cent during the period, which includes the critical Christmas shopping period and the beginning of the January sales.

UK computer games retailer Electronics Boutique said like-for-like sales in the UK and Ireland rose by 47 per cent in the five weeks to December 29, compared to the same period last year, as it benefited significantly from the launch of PlayStation 2 in November 2000. Shares fell 4.3 per cent. "December has seen a fitting end to a remarkable year for the UK retail sector," wrote Tony Shiret, an analyst at Credit Suisse First Boston, highlighting Monday's strong British Retail Consortium Christmas sales figures. "One suspects that the overwhelming sensation is that this is about as good as it gets."

Following on from Monday's weakness there were further early losses for selected telecoms and media stocks. Introducing a dose of economic reality in the US on Monday, AOL Time Warner, the world's largest media and Internet company, said it would take a $40-60bn first-quarter charge to write-down goodwill.

In the UK, media agency WPP shed 2.5 per cent, record label EMI lost 2.2 per cent and computer games developer Eidos slipped 6.5 per cent. In the telecoms sector, Cable & Wireless fell 2.2 per cent, mobile phone operator Vodafone lost 1.8 per cent and communications carrier Energis slipped 5.3 per cent. Nevertheless, former BT unit mm02 bucked the trend with a 2.3 per cent rise.

Chip stocks in London slipped back after Infineon of Germany announced a placement of 40m shares on the market, weighing down all of the European chip sector. ARM Holdings fell 4.1 per cent and Irish semiconductor maker Parthus lost 3.3 per cent. However, markets in New York shrugged off the news at the open. The Dow Jones Industrial Average was flat in early trade, while the tech-heavy Nasdaq gained 0.3 per cent.

Defensive stocks took centre stage once more. South-African based insurer Old Mutual was near the top of the FTSE 100 gainers list for a second successive day with a 3.4 per cent while industrial group Brambles Industries added 4.5 per cent, gas distributor Lattice rose 3.3 per cent and Scottish & Southern Energy gained 2 per cent.

In the pharmaceutical sector there were gains for GlaxoSmithKline up 1.1 per cent and British biotech group Celltech rising 0.5 per cent. Oils also advanced. BP gained 0.3 per cent and Shell rose 0.6 per cent.

Elsewhere, British Airways topped fallers on the FTSE 100 with a 4 per cent as investors continued to react badly to its proposed code sharing tie-up with Dutch airline KLM. Shares in low-cost airline easyJet fell 1.1 per cent after it reported a 36.5 per cent rise in December 2001 passengers to 670,390 compared with the previous year. However, shares had risen 4.5 per cent on Monday. The load factor rose to 82.8 per cent from 79.5 per cent for the period. Internet sales were 89.1 per cent of the December total up from 82.3 per cent a year ago.

Set-top box maker Pace Micro reported a 16.9 per cent rise in first-half pre-tax profit to GBP20.87m, ahead of consensus expectations for a figure of GBP19.3m. But chairman Sir Michael Bett said price pressure would put full-year revenue at the same level as last year and shares fell 6.1 per cent.

Marconi shares slipped 4.1 per cent after it said that it has entered into a contract with Ashtenne Holdings Plc for the sale of a portfolio of surplus properties in the UK for about GBP10m. The sale is the latest in a string of asset sales over the past three months by the troubled telecom equipment supplier as it tries to reduce its debt pile.

In the software sector there were losses for data management systems company Autonomy and Internet security software group Baltimore Technologies, down 3.3 and 4.2 per cent respectively. Financial software company Misys fared better, rising 1 per cent.