Telecoms group Vodafone falls to the bottom of Britain's benchmarkFTSE 100 index, as the U.S. Federal Reserve's decision to stick with itseconomic stimulus programme causes traders to move out of stocks seen as"defensive" plays such as Vodafone and into "riskier" plays such as miners.
Traders add that a move by Vodafone directors to sell shares in the companythis week adds further negative pressure on Vodafone's stock.
Vodafone is down by 1.4 percent at 208.35 pence in mid-morning trade,underperforming a 1.4 percent gain on the FTSE 100 and making it one of theworst performers on the pan-European FTSEurofirst 300 index.
JN Financial investment manager Ed Smyth says Vodafone has been impacted bythe Fed's move, which has been interpreted by investors as giving more momentumto this year's global equity rally and has pushed traders towards the more"high-beta" part of the market such as mining and financial stocks.
"High-beta" stocks tend to outperform when stock markets rise, although theyalso underperform when markets fall, whereas stocks such as Vodafone - whichoffers an above-average dividend yield - are favoured more in falling marketsdue to the safety they offer of stable profits and dividend payouts.
"We're going to start to rotate out of the defensives and high-dividendstocks and into the more 'high-beta' stocks," says Smyth.
Hobart Capital director and equity sales trader Justin Haque also cites theVodafone directors' share sale as another factor impacting its stock price.
"The magnitude of this selling is the significant point here," writes Haquein a note.
According to Thomson Reuters StarMine data, Vodafone has a dividend yield of4.8 percent - above an average dividend yield of 3.4 percent for the broaderFTSE 100 index.
The pull-back on Vodafone's shares also comes after the stock had ralliedfrom late August to early September after Vodafone's $130 billion sale toVerizon of its 45 percent stake in Verizon Wireless.
Reuters messaging rm://sudip.kargupta.thomsonreuters.com@reuters.net