The FTSE 100 Index closed down 0.34% to 5,760 points led by a poor start in the US and big losses at Cable & Wireless.
Cable & Wireless slumped 10.70% to 102.25p after it announced it is to split in half, prompting the end of CEO Francesco Caio’s tenure at the group, alongside a gloomy trading statement.
C&W warned underlying earnings for 2006-7 would be no higher than 2005-6 due to pressure on profit margins and the costs of reorganisation of its UK business.
Fellow telecoms also fell, with Vodafone down 2.28% to 118p and BT dropping 1.08% to 205.50p.
Weak miners added to the gloom as lower copper prices prompted investors to trouser profits after recent bumper gains. Rio Tinto and Antofagasta were among the worst performers, with Rio Tinto dropping 2.91% to 2,867p and Antofagasta down 2.07% to 2,037p.
But Friends Provident gained 3.47% to 201p after confirming it enjoyed a buoyant final quarter, with particularly strong growth on the international stage. The group said total life and pensions new business for 2005 increased by 70% to £5.39bn compared with £3.18bn a year earlier. Total International new business went up 311% to £2.21bn.
Tullow Oil also gained 1.62% to 313.50p, stating it expected output to rise 16% in 2006, following a 44% jump in 2005, due to strong growth at its UK and West African fields.
In the US, the Dow Jones Industrial Average has fallen 24.49 points, or 0.2%, to 10,875.43 points as investors brace for a signal from a Federal Reserve meeting this afternoon that interest rates are not high enough.
Disappointing results from Altria and Goodyear Tire & Rubber have added to pessimism earnings expectations are too high.
Altria, the world's largest cigarette maker, has lost 57 cents to $73.34. The company says fourth-quarter profit rose 18% to $2.29bn and it expects to earn $4.85 to $4.95 a share in 2006, with profit reduced by costs of 69 cents including Kraft Foods restructuring charges of 36 cents. Analysts expected profit this year of $5.48.
Goodyear has lost $3.01 to $15.75 after saying its fourth-quarter operating income will be unchanged from a year ago because cost cuts couldn't offset a 13% increase in prices for raw materials.
Cisco Systems has dropped 37 cents to $18.52on news the firm may not meet Banc of America's $6.8bn estimate for revenue in the fiscal third quarter that ends in April.
Meanwhile, Merck & Co has added 4 cents to $34.50. The drugmaker had profit, excluding some costs, of 64 cents last quarter, more than the average analyst estimate of 62 cents from Thomson.IFAonline
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