MARKET REPORT: Merger rumours send Vodafone stock soaring

Telecoms giant Vodafone hit its highest level in seven months following reports it was considering mergers in the UK and Italy.

The shares jumped 4.5 per cent, or 5.32p, to 122.86p after it emerged the FTSE 100 firm held talks late last year about buying rival UK mobile network Three from Asian conglomerate CK Hutchison.

If a deal goes through Vodafone will add Three’s 9.3m customers to its existing 20m, making it a huge player in the British telecoms space.

Merger rumours: Vodafone shares jumped 4.5% after it emerged the firm held talks late last year about buying rival UK mobile network Three from Asian conglomerate CK Hutchison

However, such a tie-up would draw scrutiny from regulators. Vodafone also entered separate talks to merge its Italian business with that of French rival Iliad in a deal that could create a £5billion telecoms powerhouse in the country.

The talks were first reported by Bloomberg. The discussions came as Vodafone attempts to fend off speculation that it could become a takeover target.

The City is awash with rumours that a US telecoms firm or private equity shark could be eyeing the group following a £9.1billion (€10.8billion) swoop on peer Telecom Italia by New York-based buyout group KKR late last year.

Stock Watch – Cake Box

Egg-free cake maker Cake Box plunged to a ten-month low after a financial blog alleged errors in its accounts.

A blog post last week highlighted what was claimed to be an ‘erroneous’ entry into the firm’s cash flows as well as historic mistakes in stock control. It also noted apparent issues with bookkeeping.

Cake Box acknowledged there had been ‘transcription errors’ in its results but these had no impact on profits.

The shares slumped 17.9 per cent, or 58p, to 267p.  

Meanwhile, it was less good news for major housebuilders, which came under pressure after a bleak assessment of the cladding crisis from analysts at Jefferies.

The broker said share prices in the sector could see ‘significant volatility in the coming months’ as the Government ramped up pressure on builders to foot a multi-billion pound bill to remove unsafe cladding from their properties.

Jefferies also warned that the cost to some companies ‘may have to increase’ and that Housing Secretary Michael Gove ‘will seek to make life as difficult as he can for all involved’. 

Persimmon slumped 6.2 per cent, or 159p, at 2390p while Berkeley fell 6.4 per cent, or 280p, to 4090p, Barratt dropped 8.9 per cent, or 60p, to 614.4p and Taylor Wimpey lost 6.1 per cent, or 9.6p, to 147.05p.

Their FTSE 250 counterparts were also on the slide, with Bellway sinking 6 per cent, or 180p, to 2803p, Redrow falling 5.5 per cent, or 35p, to 602p, Countryside Properties shedding 5.3 per cent, or 16.6p, to 294.6p, Crest Nicholson dropping 5.6 per cent, or 18.4p, to 311.4p and Vistry tumbling 6.9 per cent, or 74p, to 1005p.

The FTSE 100 dropped 2.6 per cent, or 196.98 points, to 7297.15 while the FTSE 250 tumbled 3.6 per cent, or 810.74 points, to 21452.5.

Markets continued to fret about the rising tensions between Ukraine and Russia, which some analysts fear could cause energy prices to spike further, adding to existing inflation concerns.

The prospect of more interest rate hikes when the Federal Reserve meets on Wednesday also unsettled traders. Meanwhile, the ongoing slump in US tech stocks continued to hit investment firms.

Scottish Mortgage Investment Trust, which holds stakes in Tesla and Nvidia, slumped 8.6 per cent, or 95p, to 1014.5p. Baillie Gifford US Growth Trust sank 7.6 per cent, or 17.5p, to 213p. Allianz Technology Trust fell 7.9 per cent, or 22p, to 255p.

The sell-off also spread to London’s tech firms, with payments group Wise tumbling 7.6 per cent, or 49.8p, to 605.2p while food delivery group Deliveroo dropped 4.6 per cent, or 7.5p, to 155p.

However, the shift away from riskier tech stocks was a boon for shares in more defensive firms as investors looked for safer places to park their cash. 

Tobacco giant BAT rose 1.5 per cent, or 46.5p, to 3184.5 while rival Imperial Brands edged up 0.3 per cent, or 5p, to 1736p.

Consumer goods giant Unilever was among the strongest blue-chip risers, gaining 7.3 per cent, or 268.5p, to 3943.5p amid hopes the arrival of activist investor Nelson Peltz could revive the firm’s fortunes after its failed bid to take over Glaxosmithkline’s (down 2 per cent, or 32.6p, to 1614.6p) consumer health business.