Vodafone slumps in a market weighed by Greek concerns

Vodafone has dropped over 4% in early trading as the company reported a half year pre -tax loss of £492 million, down from a profit of £6.68 billion one year earlier. The company suffered a £5.9 billion write down in Spain and Italy where market conditions have been extremely tough. On a positive note, Vodafone are expecting to receive £2.4 billion from a dividend from part-owned US Verizon which it intends to use to start a £1.5 billion shares buyback programme.

On the broader UK stock market, the FTSE was trading down 0.8% by mid-morning, in negative territory for the fifth straight session. Mining shares added pressure to the index as metal prices sold off and oil prices also declined pulling UK oil majors BP, BG Group and Royal Dutch Shell down as well. ITV is a notable riser, up over 6.5% after it reported a 4% rise in revenue in the nine months to September.

Elsewhere in Europe the major indices also tracked lower as investors are becoming increasingly nervous about the lack of a Greek solution. Despite Greece passing the required 2013 Budget through Parliament, eurozone ministers have delayed releasing the next tranche of the country’s much needed bailout money, setting their sights on another meeting on 20^th November.

What did emerge from the meeting yesterday was a definite difference in views between the lenders as to how long Greece should be given to get its debt to a sustainable level. Another split over whether some of the Greek debt should be written off by other eurozone governments is also starting to appear, however, Chancellor Merkel will be determined to avoid losses for German tax payers prior to a general election in September 2013.

Overall the markets are frustrated with a lack of progress and a lack of clarity in the Greek debt saga. There is no longer a strong feeling that the eurozone will desert Greece, however, in the short term any market gains will be capped until a line can be drawn under the Greek chapter of the eurozone debt crisis.

Focusing on economic data, UK inflation figure surprised the markets and came in much higher than expected. The forecast had been a 2.4% rise, up from a 34-month low of 2.2% in September, however, the actual figure showed a five-month high of 2.7%. The increase in university tuition fees to a capped level of £9000 pushed the cost of living higher as did higher food prices and higher transport costs. With the expected rise of energy bills this winter, the Bank of England’s target rate of 2% still seems a very long way off.

Other economic data out this morning showed that economic sentiment in Germany, the heart of the eurozone, had fallen quite considerably to -15.7 from -10 in the previous month. This negative assessment indicates that the economy is expected to deteriorate over the next six months and is probably due to disappointing recent leading indicators. Germany is really starting to feel the recessionary developments in the rest of the eurozone, which is now impacting its foreign trade and market confidence.