Vodafone's slump drags FTSE lower

The group fell 4 per cent yesterday as it warned investors that trading conditions had remained tough in its key UK and German markets.

The FTSE 100 index closed down 16.2 points at 6,308.0 as US markets opened lower following a fall in consumer confidence data.

Mike Lenhoff, chief strategist at Brewin Dolphin, said: "We've ended the quarter more or less where we started it - we haven't made an awful lot of progress.

"You've got a market that doesn't want to move decisively one way or the other. It's quite happy to tread water."

Vodafone topped the fallers' board with a loss of 6.1p to 135.5p, and was joined by life insurance firm Resolution, which also fell 4 per cent. Resolution shares were off 27p at 620.5p after the end of preliminary talks over a possible offer for the group, although losses were stemmed by news the UK's biggest manager of life funds continued to assess other business combinations.

Takeover activity failed to boost the wider market, but further speculation did help B&Q owner Kingfisher move in the right direction.

Kingfisher shares closed up 7.75p at 278.25p amid reports that Goldman Sachs had been weighing up the possibility of making an offer for the group.

Homebase owner Home Retail Group followed its rival's lead with a gain of 4p to 444p as both firms also stand to gain from signs of a pick-up in the home improvement sector.

However, Alliance Boots dipped 0.5p to 1,026.5p even after the firm agreed to open its books following an improved 1,040p, or 10 billion, offer from its deputy chairman Stefano Pessina and private equity firm Kohlberg Kravis Roberts. The fall came despite analysts' suggestions that the higher price could prove to be a knock-out offer.

A broker downgrade from ABN Amro following the "open skies" agreement to open up access at Heathrow saw British Airways fall 12p to 486p, on concerns for the future profitability of the group.

Edinburgh-based brewer Scottish & Newcastle continued Thursday's advance with a gain of 1 per cent, or 6.5p, to 601.5p, despite takeover speculation fading as analysts began to consider the regulatory hurdles in the way of any tie-up with Heineken or Carlsberg.

Rentokil Initial gained 3 per cent after it unveiled a better-than-expected 595 million price tag for its electronic security arm. The offer from US-based United Technologies easily beat the range of 500m to 550m suggested by analysts when the business was put up for sale last year. Rentokil shares rose 4.25p to 163p.

Shares in restaurant chain La Tasca remained unchanged at 195p despite a new 192p bid for the group by Tragus.

Among companies reporting results yesterday, Finsbury Foods rose 3p to 104.5p after profits gained 12 per cent on the back of demand for its premium range cakes.