LONDON (Thomson Financial) - UK blue chips were higher at midday, with a 1.3
billion pounds agreed deal for Alliance & Leicester boosting banks and ITV the
top FTSE 100 riser on reports it is talking to investors that want to buy
BSkyB's stake in the group, and with Wall Street expected to open in positive
territory.
At 11:59 a.m., the FTSE 100 index was up 93.4 points at 5,355.0, while the
FTSE 250 index was 162.4 points higher at 8,501.5.
In the United States, shares are expected to move higher at the open, with
traders eyeing developments in troubled mortgage finance providers Fannie Mae
and Freddie Mac. The U.S. government is to inject funding into the companies to
improve their liquidity and may also buy stakes in them.
Banking giants JP Morgan and Citigroup are among companies reporting
second-quarter earnings this week.
The Dow Jones Industrial Average will open about 100 points higher at
11,200, according to spread betting firm IG Index.
Back in the UK, the standout feature was Alliance & Leicester agreeing to be
taken over by Spain's Banco Santander, which also owns Abbey, for 1.3 billion
pounds. The deal is for 299 pence worth of Santander shares for each A&L share,
plus a dividend of 18 pence in cash.
By late morning, A&L shares were up 106-3/4 at 326.
Brewin Dolphin strategist Mike Lenhoff said: "It's a promising start to the
week. Santander has recognised that there's value there, and they've got a
bargain. It could be the start of a trend. And the U.S. government being willing
to help Fannie Mae and Freddie Mac is significant. But earnings season, which
really kicks off today, will also be important."
A&L midcap peer Bradford & Bingley, also under in focus for possible M&A
activity, jumped 6-1/2 at 54.
FTSE 100 banks to gain included Barclays, up 14-1/4 at 282, Lloyds TSB, 18
higher at 293-1/2, and Standard Chartered, up 74 to 1,415.
But ITV was the top FTSE 100 riser, up 5.5 pence at 43.8 after the Observer
reported the broadcaster has talked to strategic investors who want to buy
British Sky Broadcasting's 17.9 percent stake, as a prelude to a possible bid.
The FT reported that John de Mol, the co-founder of 'Big Brother' and 'Deal
or No Deal' TV producer Endemol, has refused to rule out a bid for ITV from
Endemol.
ITV was boosted further by Morgan Stanley raising its stance to
'equal-weight' from 'underweight', as the broker feels the recent share price
underperformance has gone far enough.
Most of the more dramatic gains, including that of A&L, came for companies
that had closed on Friday at or near their all-time low.
In other reaction to broker comment, Johnson Matthey added 53 at 1,670 after
UBS raised its view to 'neutral' from 'sell' on valuation grounds.
Rexam gained 25-3/4 at 368-1/4 after Goldman Sachs upgraded the group to
'buy' from 'neutral'. The broker said the current share price is a good entry
point to gain exposure to its strong returns and relatively resilient beverage
cans business.
Miner Kazakhmys was 113 higher at 1,540 on rumours a bid from Russia's
Metalloinvest. Other miners also gained, including BHP Billiton, up 62 at 1,757,
amid a mixed picture for metals prices.
A drop of over $1 in crude prices aided big fuel users, with British Airways
adding 9.65 at 208.75 and Carnival up 73 to 1,509.
On the downside, Reed Elsevier was among only a few fallers, down 5 at
536-1/2, after Deutsche Bank cut its rating to 'hold' from 'buy', while peer
Pearson was off 6 at 582 after the same broker cut its recommendation to 'sell'.
The lower oil price saw Royal Dutch Shell ease 12 to 1,928.
Moving to the second line, away from banking stocks, Imperial Energy soared
148-1/2 to 920-1/2 after it confirmed in response to press speculation it has
received a bid approach, but did not name the potential bidder.
Property company St. Modwen, reversed early losses to trade 7 higher at
322-1/2 late morning, having announced it had slipped to a first-half pretax
loss as writedowns on its residential land bank dented growth.
Pubs group Wetherspoon was 13-3/4 higher at 190, ahead of a trading update
on Wednesday.
On the 250 downside, Trinity Mirror was 2-3/4 lower at 67-3/4, taking its
value below 180 million pounds, as worries about the weakness of the advertising
market persist.
Finally, in UK economics news, manufacturers' raw materials costs continued
to spiral in June, encouraging firms to includes these in their prices, as both
input and output prices rose at their highest annual rate in over 20 years,
official figures showed.
The Office for National Statistics said input prices on a seasonally
adjusted basis rose 2.1 percent from May and by a massive 30.0 percent from a
year earlier, following increases of 3.9 and 28.2 percent respectively the
previous month.
The annual rise is the highest since comparable records began in 1986, the
ONS said. The annual rate has been rising steadily since July 2007, when it was
at just 0.6 percent.
Analysts had forecast a month-on-month increase of 2.5 percent for an annual
gain of 27.6 percent.
brian.gorman@thomsonreuters.com
btg/ms1
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