UK indices jump amid new M&A activity
A fresh round of M&A activity helped equities in the UK, US and Europe start the week in positive territory
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The FTSE 100 index added 83.5 points or 1.6% to settle at 5,165.7, while the FTSE 250 index took on 109.0 points or 1.2% to 9,169.4.
Overnight falls on Asian markets initially hit equities in the UK on Monday morning but by close of play both UK, European and US equities all trended higher, supported by a fresh round of merger and acquisition activity.
Signs that confidence in economic prospects continues to increase came on the back of several M&A deals announced Monday morning, which in turn spurred additional rumours of further deals in the pipeline.
In the US, Xerox plans to buy Affiliated Computer Services for $6.4 billion cash and shares, while Abbott Laboratories is to pay $6.6 billion for Belgian pharma group Solvay’s drugs unit, and Johnson & Johnson has parted with $444 million in exchange for an 18% stake in Netherlands biotechnology firm Crucell.
But the pharma excitement didn’t end there. Heavyweight Anglo-Swedish group AstraZeneca jumped 2.8% on the FTSE 100 index amid market talk Swiss peer Novartis could be mulling a bid. The rumours also attracted buyers to fellow pharma giant GlaxoSmithKline, which closed 2.0% higher, while Shire added 1.6%.
However, the top index performer by a mile was Wolseley after the plumbing supplies group issued final results that, despite pushing the company firmly into a loss post tax and exceptionals, were not as bad as some had feared and also contained reassuring numbers on net debt, cash flow and cost cutting initiatives. Wolseley surged 11.2% higher. Click here for more on this item.
British banks also played a part in overall index gains, with HSBC, Barclays and Standard Chartered each taking on 2.7%, 2.2% and 1.7%, respectively.
Similarly, resources stocks fuelled the FTSE fire as the price of oil rose above $67 per barrel amid heightened concerns over Iranian tension. And despite the price of certain metals, namely copper, falling further, mining issues were also in strong demand. Oil & gas producers BP and Royal Dutch Shell closed a respective 1.9% and 1.8% firmer, while mining groups Fresnillo, BHP Billiton, Xstrata and Antofagasta led the sector higher with gains of 2.3%-3.9%.
The miners’ climb was partly attributable to news Churchill Mining, which is listed on AIM, has been approached by three separate parties regarding a potential takeover.
On the downside, with just eight of the UK’s largest 100 companies slipping into the red on Monday, there was little in the way of negative news to dampen investor spirits. Home Retail was the main blue-chip casualty, down 3.2%, following a recommendation downgrade to Hold from Buy at Credit Suisse, which cited the group’s Argos business.
BT Group was also under the cosh amid concerns of increased competition on the back of news Virgin Media will this Thursday join the London Stock Exchange as part of its aim to raise its profile in the UK and Europe. Virgin Media would be eligible for listing on the FTSE 100 index were it not for its decision to keep a primary listing in the US on the Nasdaq.