Market Report: Strong growth at Orange sparks mmO<SUB>2</SUB> sell-off

MMO ₂ found itself firmly on the sell list yesterday as forecast-busting results from its rival Orange led to fears that the unit of France Telecom is eating into mmO ₂'s market share.

MMO ₂ found itself firmly on the sell list yesterday as forecast-busting results from its rival Orange led to fears that the unit of France Telecom is eating into mmO ₂'s market share. Orange boasted that it had won 139,000 new customers during the third quarter, which is a great achievement as most analysts were expecting no growth at all.

As the news hit traders' screens they rushed to exit mmO ₂, leaving the stock down 2p at 105p on the day. But supporting the shares from an even greater fall was Investec Securities. It urged investors not to be too quick to abandon the group. "We have no fears over mmO ₂'s progress", the South African broker said. Investec believes that the overall UK market is growing faster than expected and that if someone is to lose out from Orange's revival it is more likely to be Vodafone and T-Mobile.

The broker has been a supporter of mmO ₂ for a long time and has been right to be so. Shares in the mobile group have soared over the past 12 months. Investec is convinced that this trend is set to continue and has a 130p price target. "We still see further earnings upgrades as possible at mmO ₂ over the next 12 months driven by customer growth in the UK and Germany and the possibility of stronger than expected margins in both territories also," Investec said.

Smith & Nephew rallied 7.5p to 458.5p thanks to comments from Cazenove. The stock has been under pressure of late amid worries of slowing growth in some of the orthopaedics group's main markets but Cazenove argued yesterday that they have been overdone. The brokers does, however, expect nervousness to continue to surround S&N ahead of its results on Thursday.

The mining sector was unsettled by news that China had increased its interest rates for the first time in nearly a decade. The move by the government is an attempt to slow the country's booming economy but those investors with exposure to industry worry that this will -inevitably have an impact on commodity prices and mining company profits. This is because the bulk of the demand growth which has driven commodity prices in recent years has come from China. Hence, Xstrata fell 59p to 839p, Rio Tinto retreated 41p to 1,423p, Anglo American fell 36p to 1,203p and Lonmin dropped 44p to 1,010p.

Despite the depressed state of mining stocks, the FTSE 100 managed a 12-point rise to 4,642 while the FTSE 250 gained a more modest 4 points to 6,326. Morgan Crucible jumped 9.75p to 152p after Citigroup reiterated its "buy" rating on the stock after a meeting with the company. The US broker has a 180p price target. UBS downgraded Go-Ahead, sending the transport group 11p lower to 1,265p. After the stock's strong performance in recent months the Swiss broker believes there is little further upside for investors and so scaled back its rating to "hold" from "buy".

Elsewhere, Bridgewell Securities alerted investors to the fact that JD Wetherspoon, up 0.5p to 235.5p, has not bought back its own shares for more than two months although the company certainly has the financial ability to do so and has stated its intention to do so. The broker suggests that the company's next trading statement, due at the start of next month, may contain a profits warning and so its management team are waiting until after this to buy back shares more cheaply. An alternative reason may be because JD Wetherspoon is in takeover talks. Bridgewell, however, thinks this an unlikely scenario. It takes the view that there is insufficient upside for backing a management buyout at the current share price and sees a move on the pub group by a rival as plagued with integration risks.

Texas Oil & Gas, steady at 18.5p, disclosed that its former chairman, David Parlons, had sold 1 million shares thereby reducing his holding to 5.1 million or 7 per cent. Meanwhile, Regal Petroleum rose 20p to 344p as Frank Timis, the explorer's executive chairman, picked up 150,000 shares at 332p each. Dicom improved 21p to 768.5p on the back of a new business win in South Carolina.

Ebookers gained 9.25p to 230p with bulls of the stock convinced that a formal bid for the company will be unveiled quite soon. They reckon it will value the online travel group at about 280p a share. Ebookers has been in talks with various parties since the start of September, when it effectively put itself up for sale.

Finally, investors should keep an eye on Jessops today. The camera retailer is set to float at between 185p and 220p with a view to raising £100m. According to talk among market professionals, Jessops is likely to debut towards the lower end of the range. The company will use the cash it raises to pay down debt.