FTSE 100 ends higher as TMT stocks extend recovery
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FRIDAY, OCTOBER 20, 2000 12:16:00 PM EST
By David Holmes
LONDON, Oct 20 (Reuters) - A revival in telecom, media and technology (TMT) stocks propelled Britain's FTSE 100 higher for a second day on Friday, despite a bout of profit-taking in drugs and other defensive segments of the market.
"We've had a good rally in the TMTs, because Nasdaq has dragged everything up and people are switching out of some of the safety areas," said one senior equity salesman.
Extending a rebound from near five-month lows seen on Wednesday, the blue chip index closed up 57.4 points or 0.9 percent at 6,276.3.
Gainers were in a near three-to-two majority as the telecom trio of Vodafone VOD, BT BT and Cable & Wireless CW accounted for 22 points of the FTSE 100's rise.
On the week, the FTSE 100 showed a 66.7-point improvement, despite a period of typical October turbulence that coincided with the 13th anniversary of the 1987 crash. The index has bounced from near the 6,000 level but remains near the bottom of a 700-point trading range that has predominated this year.
Tech and telecom stocks took their cue from a major rebound in the bellwether U.S. Nasdaq index, which extended Thursday's major 7.8 percent recovery to be up 75 points or 2.2 percent by London's 1530 GMT close -- helped by strong earnings from Internet auctioneer eBay EBAY.
The Dow Jones average, however, eased 28 points from its previous day advance.
With UK tech stocks ranging from IT consultancy Logica LOG to Internet security group Baltimore BLM dominating the FTSE 100 leader board, the techMARK 100 index closed up 122.81 points or 3.7 percent at 3,450.54.
The FTSE 250 index of midcap stocks gained 67.3 points or 1.1 percent at 6,502.0 -- also led higher by tech stock gains.
UK equity trading volume reached 1.5 billion shares by the London close.
YEAR-END RALLY
Some market participants said the FTSE 100 looked well placed to build on its still tentative recovery, with hopes still pinned on the traditional year-end rally that often kicks into gear by late October.
"The longer we go without breaking down further, the greater the confidence will be that the market will eventually start to perform," said Liz Thom, a director of money manager Edinburgh Fund Managers.
"We're at that point of inflexion in the economy when growth is slowing and interest rates are peaking, and you always go through this hiatus at that time," Thom said.
"We're still quite relaxed on a 12 month view," Thom added. "When the market gets down to its lower levels, if we have some cash we would be confident enough to put some money in."
Yet not everyone was convinced the rocky trend of recent sessions was over.
"We're in a bear market that will continue to erode people's confidence," said Jeremy Batstone, analyst at NatWest Stockbrokers. "There will be periods when the market will have an upward spike, but interspersed with phases of profound introspection."
"A soft landing for the economy will be no panacea for equities and a loss of pricing power for companies will undermine valuations, especially in a period of slowing growth," Batstone said.
Telecoms as usual provided the market's driving force, though BT's 5.2 percent gain was exaggerated by an erratically low close in the stock on Thursday. Cable & Wireless was helped by a recovery in Hong Kong's PCCW 0008, in which the UK firm holds a 15.3 percent stake.
The telecom sector even survived disappointing results from Swedish telecoms equipment maker Ericsson LMEB, whose strong profits were offset by the company cutting its sales and margins outlook for 2000 and forecasting a higher than expected loss in handsets.
DEFENSIVE LOSERS
On the downside, defensive sectors that were in lately in favour lost ground, with drug leaders SmithKline SB, AstraZeneca AZN and Glaxo GLXO losing two percent or more to carve 27 points off the FTSE 100.
Household goods groups Reckitt Benckiser RB also declined as the vicious sector rotation theme took another twist, while Internet Service Provider Freeserve FRE fell six percent ahead of its relegation from the FTSE 100.
News and information provider Reuters RTR benefitted from strong third quarter revenues and confirmation of plans for the flotation of its Instinet broking arm, as well as sharing in the TMT rally. The stock closed up 5.9 percent.
Among midcaps, biotech stock SkyePharma SKP topped the gainers list with an 11.3 percent rise after announcing that its lead dermatology product, Solaraze, had received final approval from the U.S. Food and Drug Administration.
Smallcap features included drug delivery firm Quadrant Healthcare QTH, whose shares more than doubled in value to 60-1/2p after a bid from Inhale Therapeutic Systems INHL.
Online auctioneer QXL QXL rose for a second day, recovering from recent lows with the help of eBay's strong figures, while tool hire specialist Multi Group MLT added 28.1 percent after a company executive's upbeat presentation on a TV investor programme.
The day's big loser was concert equipment group Gearhouse GHG, which plummeted 51 percent after it said a review by incoming finance director John Wall had revealed it would make a pre-tax loss in the year ended June 30.
Chartwise, the FTSE 100 has bounced from Wednesday's trough just above the psychologically important 6,000 support level, but faces resistance at around 6,400, where a rally earlier this month ran out of steam. |
