* FTSE 100 down 1.5 pct
* Vodafone biggest drag after AT&T says not planning
* BG sees biggest fall since 1987 after production warning
* Index finds support at the 200-day moving average
By Alistair Smout
LONDON, Jan 27 Britain's FTSE 100 slipped to
fresh five-week lows on Monday, extending last week's falls on
the back of steep slumps in heavyweight mobile operator Vodafone
and oil and gas firm BG Group.
Vodafone, the third biggest company in the FTSE 100,
fell 5.8 percent after U.S. mobile operator AT&T said it
was not planning to take over the British-listed firm, thus
putting an end to months of speculation.
Vodafone had seemed good value for takeover by AT&T, Gerard
Lane, equity strategist at Shore Capital, said, once its
disposal of its stake in Verizon Wireless had gone through.
"We'd had comments attributed to AT&T suggesting that
Vodafone was being looked at. The non-Verizon element of
Vodafone looks undervalued on a EBITDA basis, so people could
justify a potential AT&T take-out on a higher premium than the
ex-Verizon Vodafone was trading on," Lane said.
"Now that's been kiboshed, it's understandable why investors
have reacted as they have."
That drop alone took 25 points off the British blue-chip
index, while BG Group contributed another 24 points to the drop.
Its shares fell 14.7 percent - on track for their worst day
since 1987 - after the company warned that production this year
and next would fall short of expectations, calling its guidance
for 2014 "disappointing" due to ongoing problems in Egypt.
The FTSE 100 was down 94.49 points, or 1.4 percent at
6,569.25 points by 1158 GMT, following on from a 2.4
percent fall last week.
The drop in the FTSE took the index down to fresh 5-week
lows, and past technical support at the 100-day moving average.
Weakness in recent sessions has been triggered by turmoil in
emerging markets, which has knocked stocks around the globe,
with fears that developed market earnings could be impacted by
weakness in EM currencies.
"The question is whether the demand from developed market
economies is going to outweigh a currency impacted revenue line,
and I expect it probably won't," Shore Capital's Lane said.
The steepness of the sell-off has seen the index drop from
technically overbought conditions, according to the 7-day
relative strength indicator (RSI), into oversold territory in
less than a week.
The index bounced off lows at the 200-day moving average
around 6,555.65 points, which was highlighted by Clive Lambert,
an analyst at Futures Techs, as a key support area.
However, technical charts suggest there is scope for future
weakness, given that the selloff started when the index was less
than 10 points away from the May 2013 high, and less than 100
points from all-time peaks.
"The fact that we failed at such a key resistance level and
then saw a significant pullback from there, that has to make you
think that there could be more downside to come," Lambert said.