Sterling still suffers against euro, dollar

London’s blue chip index slipped into the red today despite a big jump in Vodafone’s share price amid talk of a record merger deal in the US.

Vodafone shares leapt seven per cent or 11.4p higher to 180p, but the FTSE 100 Index reversed earlier gains to close down 4.3 points at 6427.6 having finished on Tuesday at its highest level in five years.

The Newbury-based mobile phone giant, which holds 45 per cent of America’s largest network, has reportedly held talks with majority owner Verizon Communications over a full merger of the two companies.

While discussions broke down in December, a straight sale of Vodafone’s stake in Verizon Wireless is still seen as a possibility.

Vodafone’s value jumped £6 billion to more than £88 billion following yesterday’s rally. Verizon is worth £90 billion, which would make a merger of the two the biggest in history.

On Wall Street, the Dow Jones Industrial Average added to yesterday’s all-time high after encouraging jobs and factory orders data, rising by more than 30 points to over 14280 in early session trading.

The increased appetite for risk has also been boosted by confidence that central banks will continue with measures to boost economic activity.

A run of better-than-expected data has also offset ongoing concerns about an $85 billion (£56 billion) package of automatic spending cuts.

Sterling continued to suffer in the currency markets ahead of today’s Bank of England interest rates meeting amid expectations the decision will be close after governor Sir Mervyn King was one of three policymakers that wanted to add another £25 billion to its asset purchase programme last month.

The pound was down against the US dollar and the euro at 1.51 and 1.16 respectively.

The biggest FTSE 100 risers were Vodafone up 11.4p to 180p, Admiral ahead 67p to 1334p, Wood Group 35.5p higher at 853.5p and BSkyB up 25p to 888.5p.

The biggest FTSE 100 fallers were CRH down 64p to 1450p, Standard Chartered off 60.5p to 1777p, Evraz 8.6p lower at 253.5p and Kazakhmys down 17.5p to 555p.

Car insurer Admiral joined Vodafone on London’s top flight risers board after it reported a better-than-expected 15 per cent rise in full-year profits to £345 million and increased its dividend for the year by 20 per cent.

Chief executive Henry Engelhardt was upbeat about prospects, saying he believes the next 20 years will make the first 20 “seem downright pedestrian” for Admiral. Shares were 67p higher at 1334p.

There was also a positive reception for Legal & General, which climbed 3.3p to 166p after increasing its dividend by 20% in the wake of full-year results, with annual premium equivalent sales up 15 per cent to £2.1 billion in 2012.

Imperial Tobacco shares were off 58p to 2385p amid speculation that the UK government is planning to copy Australia by introducing plain packaging on tobacco products.

And Royal Bank of Scotland shares were down 3.7p to 309.1p after Bank of England governor Sir Mervyn King called for the lender to be broken up into “good” and “bad” banks, instead of waiting two years to return it to the private sector.