Market report: Thursday close

VODAFONE slipped closer to its record low of 80 1/2p of last July, hit by downgrade from house broker UBS Warburg and France Telecom's plans to raise £9bn via a discounted rights issue.

UBS has marked the mobile group down to a 'hold' rather than its previous stance of 'strong buy', and cut its price target to 100p from 140p. Vodafone shares tumbled 6p to 92 1/2p. Other telecoms stocks fell in sympathy, with mmO2 down 2 3/4p to 45p, Cable & Wireless 4 1/2p to 149p and BT Group 7p to 199p.

Blue-chips opened weaker from the outset, worried by war talk, though US Federal Reserve chairman Alan Greenspan's comments were interpreted as cautiously optimistic. But the FTSE 100 fell in line with Wall Street, falling 125.8 points to 4084.9.

Troop movements in the Middle East increased tension in the oil-rich region, leading to BP losing 16 1/2p to 466p, and Shell shedding 18p to 410p.

Insurers remained under the cosh on suggestions that Royal & SunAlliance, down 1p to 120p, was about to launch its long-predicted rights issue. Even the terms, a one-for-one at between 65p and 70p, were in the market, though the timing and whether it will be fully underwritten remain unclear.

RSA was beaten to the punch by Legal & General, down 5 1/4p to 104 3/4p, with its £786m rights earlier this week. Top RSA executives in recent weeks have been meeting advisers at Cazenove, and some of them are believed to have been upset at delays in getting the rights away. The departure of chief executive Bob Mendelsohn did not help sentiment.

Other insurers tipped to raise cash also tumbled. Aviva fell 20 1/2p to 415p. Its executives are believed to be in the final stages of making an £800m rights issue. Prudential was off 25 1/2p to 430p and Friends Provident lost 1 1/2p to 133p.

ICI fell 15p to 233p on rumours about its paints division. It looks as though some dealers may have their lines crossed over the difficulties facing some US paint firms over a law suit about lead levels in their paints. ICI's US subsidiaries have not suffered such litigation.

One of the few shares to make any headway was P&O Princess, which sailed to the top of the blue-chip risers with a 12 3/4p gain to 445p, as the US Federal Trade Commission approved takeover bids from Carnival Group and Royal Caribbean Cruises. The decision will now be left to P&O Princess shareholders, ending a saga that started last November.

Dairy Crest, Britain's biggest dairy products firm, may be poised to buy St Ivel spreads from Uniq for up to £60m and its shares fell 11p to 392p. Uniq added 4p to 171p.

Chime Communications fell 2 1/2p to a three-year low of 51p after first-half pre-tax profits were halved, mainly due to lower income from financial public relations.

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