Wilting WPP takes a 'bath'

ANYONE remember the 'V- shaped' recovery? The theory, widely held not so long ago, was that the US economy would lead the world in a swift, dramatic, V-shaped rebound. No longer. Global advertising giant

There are 'few, if any, signs of recovery' in the highly cyclical advertising and marketing businesses, it said. Although WPP, run by chief executive Sir Martin Sorrell, expects things to improve slowly, it warns that 'pronounced recovery will have to wait until the US Presidential elections and the Athens Olympic Games of 2004'.

WPP is also being hurt by the tumbling dollar, down another half-cent to $1.5045 against the pound. Nearly half its business is in the US. Sales in the first five months are down 2% and the 15% operating margin target for the year will be 'difficult to achieve'. The shares have fallen 810p in less than three months, wiping £3bn off the market value - and £33m off Sorrell's stake, including £5m on Monday.

Lorna Tilbian, analyst at investment bank Numis, cut this year's profit forecast by £20m to £500m and remained cautiously optimistic. But the shares remain pricey on 18 times likely earnings.

The warning knocked TV broadcaster Carlton 7 1/2p to 218 1/2p and BSkyB 6 1/2p to 624 1/2p; otherwise, media stocks - already badly pummelled over recent weeks - held up.

WPP is a global bellwether and the trading warning hit a market already struggling to rebuild confidence following-last week's slump. Strong overnight gains in Tokyo helped lift the FTSE 100 40 points in early dealing before quickly giving up the gains and heading south. Wall Street plunged early on after opening as corporate accounting worries, share valuations and the weakening dollar continue to plague the market, before staging a sharp comeback in later trade. Nasdaq briefly dipped below last September's low. The Footsie closed down 63.4 points at 4541.9, just 108 points above last October's five-year low. Just 15 of the top 100 shares rose, while 83 declined.

Among blue chips hitting fresh four or five-year lows were mobile giant Vodafone, down 2 1/2p to 87 1/2p, insurers Prudential, down 17 1/2p to 550p, and CGNU, off 16 1/2p to 493 1/2p, and fund manager Schroders, 21 1/2p lower at 580p. Drug giant GlaxoSmithKline crashed another 36p to 1351p, even though it bought back 3.6m shares. It also purchased 3.6m on Friday.

Gold continues to glister as the dollar dulls. The metal jumped another $2 to $326.40 an ounce, rallying from last week's brief sell- off and approaching 2 1/2-year highs.

But mining stocks came under renewed pressure as the weak global economy dims the outlook for other metals. Rio Tinto fell 23p to 1217p, BHP Billiton 5p to 348p and Anglo American 25p to 1124p. Lonmin, a mainly platinum play, eased 10p to 1190p. They were further hurt by fears that the deepening financial crisis in Brazil will spread to other emerging markets. South Africa's rand fell sharply. HSBC, the third-biggest bank in Brazil, fell 10 1/2p to 747p, but declines to comment on its exposure.

Oil firmed 20 cents to $24.95 a barrel as Middle Eastern woe continued and Venezuela played down reports it is raising output. BP eased 1p to 531p, even though Goldman Sachs moved the stock on to its recommended list, citing the 100p slump since March and positive talks with management. Rival broker Commerzbank ended its bearish stance on the stock and on Shell, down 8p to 467p.

In this environment, saying you will merely meet targets is enough to lift your shares. Such reassuring statements boosted trucking and shipping giant Exel 11p to 831p, car breakdown group Lex Service, soon to be called RAC, 14p to 484p, Mersey Docks 8 1/2p to 595p and BBA 4 1/2p to 278p.