Vodafone Share News (VOD)

LONDON (Alliance News) - UK stocks closed heavily down again Monday, amid concern that an expected further cut to the US Federal Reserve's asset-purchase program this week will accelerate the slowdown of emerging markets growth.

London's blue chip index suffered the most, dragged down as well by the poor performance of two of its biggest companies - Vodafone Group PLC and BG Group PLC.

The FTSE 100 closed down 113 points, or 1.7% at 6,550.66. The FTSE 250 ended down 1.1% at 15,528.21, with the AIM All-Share index down 1.3% at 850.37.

The under-performance of the FTSE 100 Monday was in no small part due to Vodafone, which closed down 5.7%. Shares opened lower after the US's AT&T Inc denied that it would make a bid for the world's second-largest mobile phone company.

Vodafone is the second biggest UK-listed company by market capitalisation, after HSBC Holdings PLC. The stock had traded 23% of its average daily volume within six minutes of the market open, and Accendo Markets estimates that it single-handedly accounted for 21 points of the 113 points lost by the leading index Monday.

BG Group shares dropped almost 14% after announcing that it will miss its 2014 production targets due to ongoing issues in Egypt. Oil production is now seen in the range of 590,000 to 630,000 barrels of oil equivalent per day in 2014, and 2015 levels in the range of 710,000 to 750,000 barrels of oil equivalent per day, down from the company's 775,000 to 825,000 barrels of oil equivalent per day guidance given in September. BG Groups shares closed at a nine-month low of 1,080.40p.

BG Group boasts less than half of the market capitalisation of Vodafone, but Accendo Markets estimates its huge share price drop accounted for 19 of the points lost by the FTSE 100 Monday.

Royal Bank of Scotland Group PLC, another large blue chip, took a share price dive towards the end of the day as the largely government-owned UK bank said it has set aside another GBP3.07 billion for provisions related to mortgage-backed securities, payment-protection insurance and interest-rate hedging products. Closing down 2.3% Monday at 331.4 pence, RBS shares now trade back at mid-December 2013 levels.

It wasn't all bad news for blue chips, however, with FTSE 100 water companies, United Utilities Group PLC and Severn Trent PLC, closing as the biggest gainers, up 2.1% and 1.4%, respectively. The water groups outperformed following a proposal from regulator Ofwat to limit company returns that was less restrictive than had been feared.

In the FTSE 250 index, F&C Asset Management PLC was the stand out mover, gaining almost 25% to close at 116.4 pence after it confirmed recent press speculation that it has received an indicative takeover offer of GBP697.2 million, or 122 pence per share, from BMO Financial Group, part of Bank of Montreal, one of the big five banks in Canada.

European stock markets fared slightly better as a whole, with the French CAC 40 closing down 0.4% and the German DAX down 0.5%.

German business confidence improved for the third consecutive month to a 29-month high in January, improving sentiment among European investors Monday. The business confidence index climbed to 110.6 points in January, the highest since July 2011, from 109.5 a month ago, according to the survey based on 7,000 participants compiled by the IFO institute. The score was forecast to rise to 110 points.

US markets also are performing slightly better than the UK, amid suggestions of bargain hunting from the recent heavy falls. After the European market close, the DJIA is flat, the S&P500 is down 0.3%, and the Nasdaq Composite is down 0.8%.

The US Markit Services PMI recorded 56.6 in January, up from 55.7 in December and beating economist expectations of 56.2.

The economic focus of the week remains the January meeting of the US Federal Open Market Committee, which starts on Tuesday. Markets will be anticipating a further cut to the Federal Reserve's asset purchase program and any commentary to come from Janet Yellen at her first press conference as Fed chair on Wednesday.

The market reaction to the first "taper" in December turned out to be fairly muted, but in recent days the leading UK share index has seen the most significant correction since June 2013, when outgoing Fed Chairman Ben Bernanke first said that the US Central Bank was looking to slow its bond buying program before the end of last year.

At that time the FTSE 100 fell 5.0% in three days amid investor concern that stocks would struggle without the support of Fed funds. Over the last three days, the UK blue chip index has fallen 4.0%.

"It’s a bit early to be hitting panic stations yet, but with another forecasted USD10 billion cut to the Fed’s helping hand this Wednesday and a continued rout on emerging markets, January may well end up being a month to forget for equities, just as many had feared," said CMC Markets senior trader Toby Morris.

The main economic focus on Tuesday morning will be the initial estimate of fourth-quarter UK GDP, released at 0930 GMT. Economists estimate growth of 0.7%, slightly lower than the 0.8% seen in the third-quarter.

In the corporate calendar, miner Fresnillo PLC is due to release a fourth-quarter trading update, while British Land Company PLC, Carpetright PLC and Greencore Group PLC are due to release interim management statements.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

Copyright © 2014 Alliance News Limited. All Rights Reserved.