FTSE in-depth: Investors told to be on guard

By Geoff Foster for MailOnline
Updated: 04:33 EDT, 9 March 2011

It's time to go on the defensive. That's probably not what Spurs manager Harry Redknapp will tell his erratic team ahead of tonight's crucial Champions League tussle with AC Milan, but it is the advice Morgan Stanley's influential strategist Graham Secker yesterday gave to clients ahead of what he fears could be a sharp fall in equity share prices.

Foster: FTSE fell on fears over Libya.

He believes the risk reward for equities is beginning to deteriorate given the combination of heightened geopolitical uncertainty, a rising oil price and the increasing prospect of higher interest rates.

All in all, investors should consider increasing their weighting in defensive sectors.

Secker's preferred sector is telecoms as it offers greater potential for a positive growth surprise as well as offering a substantial dividend yield boost over other sectors.

On the back of that, telecoms analyst Nick Delfas upgraded his ratings on British Telecom (7.3p better at 191.1p) and Vodafone (3.15p up at 181.85p) to overweight from equal weight.

Delfas lifted his target price for Vodafone to 230p. Every penny movement in its share price either way accounts for three points on the Footsie.

Early rumours that anti-Gaddafi protesters were not open to discussions with the troubled leader, citing a lack of trust, prompted an early nervous 62-point fall in the Footsie.

It later rallied when they appeared to lack substance and the close was almost a point better at 5,974.76. Wall Street traded 32 points higher at the outset after the oil price eased after Kuwait's oil minister said OPEC was considering raising production for the first time in more than two years.

Buying ahead of today's full-year results helped insurance giant Prudential rise 13.5p to 712.25p. City vultures will be ready to pounce if rumours that chief executive Tidjane Thiam could receive a bonus package worth more than £4m prove correct.

It was Thiam who left the group nursing a £376m bill following his humiliating failure to buy Asian rival AIA for £24bn last year.

Persistent selling left Randgold Resources £4 or 8.2% lower at 4475.5p. The West African-focused gold producer has been plagued by concerns that violence in the Ivory Coast could hit its operations there.

Cluff Gold, down a further 7.25p at 101.5p, on Monday temporarily suspended its operations at its Angovia mine in the Ivory Coast.

African Barrick Gold fell 20.5p to 547.25p ahead of the group's expected relegation from the prestigious Footsie today. Broadcaster ITV, which is tipped to take its place, eased 1.6p to 90.025p on profit-taking.

Tullow Oil lost 33p to 1460.5p ahead of today's full-year results. RBS reckons the drilling schedule means it is unlikely that any new material well results will be forthcoming.

Heritage Oil gushed to 304p before closing 7.5p better at 281.75p on a combination of early gossip that either BG was on the verge of acquiring its assets in Iraq or that Austrian energy group OMV is about to buy the company lock, stock and barrel. BG later said it is not interested in Iraqi assets.

Shrugging off an Investec earnings downgrade and 10% cut in target price to £4, Marks & Spencer improved 2.6p to 338.4p. The broker slashed its 2012 full-year pre-tax profit forecast to £700m from £745m to reflect the hostile trading environment.

On the other side of the street, Superdry fashion group Supergroup fell 92p further to 1402p to trade 26% below its 52-week peak of 1898p. Meanwhile, Mike Ashley's Sports Direct shed 5.3p to 180.65p.

Better-than-expected annual results lifted John Menzies 32.75p to 470.25p. Underlying profits soared 28pc to £45m and the final dividend of 14p a share takes the full-year dividend to 19p against estimates of 15p. Chairman Iain Napier said the current year has started well with trading ahead of last year.

Energy sector investor Parkmead, which closed 2010 in a blaze of glory after Tom Cross, who trousered £37m after selling Dana Petroleum to Korea National Oil Corporation for £1.87bn, became executive chairman, jumped 2.5p to 22.88p.

Buyers got involved again on hearing that Dr Colin Percival, previously exploration manager at Dana, has been appointed group exploration manager of Parkmead.

Following a bullish operational update on its Jolly Ranch project in Colorado, US, Nighthawk Energy rose 1.51p to 10.25p. Westhouse Securities sees the announcement as building confidence in the project and has a target price of 37p on the stock.

32Red advanced 3p to 23.5p following impressive preliminary results. Shareholders were told that 2010 produced record net gaming wins for the company and that current year trading is very strong.