Vodafone decline weighs on UK's FTSE 100

Wed Apr 3, 2013 3:46am EDT

* Vodafone falls after Verizon denies bid for it

* FTSE slips 0.4 pct, after solid gains in previous session

* Tendency remains to buy stocks on the dip

* Verizon Wireless deal still likely -analysts, traders

By Sudip Kar-Gupta

LONDON, April 3 (Reuters) - Britain's benchmark share index fell on Wednesday, retreating from gains in the previous session as heavyweight telecoms group Vodafone weakened after U.S. peer Verizon denied it was bidding for it.

The blue-chip FTSE 100, which rose 1.2 percent on Tuesday to push the index back towards five-year highs reached last month, was down by 0.4 percent, or 22.82 points, at 6,467.84 points.

Verizon's denial sent Vodafone down by around 2.4 percent, with Vodafone's fall taking the most points off the FTSE 100, although Verizon added it would still be a willing buyer of Vodafone's stake in their Verizon Wireless venture.

Several analysts and traders expected a deal over Verizon Wireless in the near future, which would prevent Vodafone shares from losing too much ground.

"Credit markets are anticipating a change in the status quo at Verizon Wireless and implied volatility analysis shows an increased chance of a large move in Vodafone shares," Olivetree Financial Group wrote in a note.

Securequity sales trader Jawaid Afsar also said he would look to use Vodafone's fall to buy the stock on the cheap.

"I would be a buyer on the weakness. Some sort of action will take place," he said.

BIAS TO BUY ON THE DIP

Expectations of a pick-up in merger activity, coupled with injections of liquidity by world central banks into financial markets, have enabled equity markets to continue a rally from 2012 into 2013 despite a weak economic outlook.

The FTSE 100 has risen nearly 10 percent since the start of 2013, and a Reuters poll last month showed that analysts and fund managers expected it to reach 6,750 points by the end of 2013, and 6,582 by mid-2013.

Afsar said he would look to buy the FTSE 100 if it fell back towards the 6,412 point level.

McLaren Securities Managing Director Terry Torrison also said he would still look to buy shares on days when the market fell rather than sell into rallies, on expectations that the stock market would continue to rise gradually this year.

"I think we keep going onwards and upwards. There's no real value anywhere else in comparison to the equity market, where you've got both yield and upside," said Torrison. (Editing by Stephen Nisbet)