Banks, telecoms batter struggling Footsie

A London stock market cowed by the constant battering of telecom, media and technology stocks was given another nasty knock yesterday with news that the Office of Fair Trading has referred the Lloyds TSB bid for Abbey National to the Competition Commission.

Sentiment towards Abbey National shares had begun to pick up on Thursday afternoon. But it was all one-way traffic yesterday, once the news was announced in mid-morning, compounding what has been a bad week for the banking sector following the start of another mortgage price war.

Lloyds TSB also came under the cosh, reflecting the market's disappointment that its bid had been referred. Other bank shares suffered, especially Barclays, whose perceived bid ambitions, possibly towards Bank of Scotland, are now seen to be increasingly likely to be blocked.

Just as the market was coming to terms with the bearish story hitting the banks, there was another dose of bad news from across the Atlantic where Motorola, the telecoms equipment manufacturer, announced that it might record a loss for the first quarter.

That was just about the last straw for the equity market. Telecoms, which showed signs of a tentative rally on Thursday, moved back into the line of fire and anything remotely associated with the sector, such as chip makers or telecoms equipment manufacturers, was hit hard.

Before those two bombshells, the market had made a half-hearted attempt to extend Thursday afternoon's late rally. With all the bad news piling up and Wall Street taking severe punishment the FTSE 100 fell sharply and came perilously close to falling below 5,900, which would have triggered further weakness, dealers claimed.

Despite the bad news for the telecoms sector, there was some evidence that the recent severe weakness in Vodafone had attracted the attention of a handful of funds looking to call the bottom in the stock. Specialists said one US fund management group, known to have sold all its telecom stocks last spring, had moved back into the market on Thursday and bought £100 million worth of Vodafone shares. And there was also evidence of renewed buying from the same fund management group yesterday as well as other big UK and US funds.