Unexpected speed of revenue fall-off in advertising hits WPP badly

LONDON REPORT: FTSE 100: 3,753.68 (+41.62) Mid-250: 6,162.54 (+100.72) Small Cap: 1,676.67 (+23.13) : WPP LAGGED behind the market rally yesterday after MorganStanley said advertising budgets were falling faster than expected.

The broker also cast doubt on WPP’s perception as defensive because of its focus on marketing services, digital and emerging markets.

These three areas are underperforming the more cyclical advertising businesses, it said.

Analyst Edward Hill-Wood forecast WPP to report earnings of 36p per share next year, compared with a market consensus of 50p.

That forecast would bring WPP closer to testing its lending covenants – a concern as the firm is expected to come to market shortly to refinance about half its £650 million debt due in 2010.

The financial stocks led the FTSE 100 to its highest level in a fortnight, with the index up 1.1 per cent, or 41.62 points, to 3,753.68.

It showed a 6.3 per cent gain for the week, which was its biggest advance since the turn of the year.

Barclays rose 3.1 per cent to 74.1p yesterday amid renewed speculation about its options to pay for participating in the government’s asset insurance scheme.

Barclays Global Investors was once again rumoured as a potential disposal, along with Barclaycard and the emerging markets unit.

Friends Provident was weakest among the insurers.

The stock lost 5.5 per cent to 68.3p amid expectations of a dividend cut at its preliminary results next week.

Thomas Cook rallied 4.6 per cent to 212¾p as analysts played down comments from an executive about a poor start to the year, which had led the stock 11 per cent lower on Thursday.

Heavyweight oil and gas producers were broadly higher as well, as the price of crude held near $47 a barrel ahead of this weekend’s Opec meeting in Vienna and hopes about the demand outlook in China.

Chinese premier Wen Jiabao said he would deliver on a promise of 8 per cent growth in 2009 and might roll out extra stimulus spending to meet the goal.

BP and Royal Dutch Shell were up 0.7 and 1 per cent while BG Group, Tullow Oil and Cairn Energy gained 3.6 to 4.1 per cent.

Investors also hoped for strong signals from this weekend’s G20 meeting of finance ministers and central bankers regarding plans to tackle the financial crisis. – (Financial Times service/Reuters)