Yesterday's trading: King bullish on recovery hopes

By Geoff Foster for MailOnline
Updated: 03:42 EDT, 13 August 2009

Mervyn King mildly bullish, whatever next? The Governor of the Bank of England put a smile on City faces for a change as he offered some hopes that the UK economy is over the worst of recession.

Round up: All the action from yesterday's stock market

Commenting on the Old Lady's latest Inflation Report, which actually also poured gallons of cold water on recent speculation that UK interest rates could soon be on the way up, he said that prospects for economic recovery were now 'somewhat stronger'.

Dealers heaved a heavy sigh of relief and buyers soon helped the flagging Footsie replace a 40 points deficit with a gain of 50 points. It closed 45.42 points to the good at 4,716.76. The FTSE 250 added 49.27 points to 8,351.93.

Wall Street then added its considerable weight behind the rally in London with an opening rise of well over 100 points. Toll Brothers, the biggest luxury homes builder in the US, reported a much brighter outlook for the American housing market. It posted the first increase in contracts in four years and said that cancellations declined to the lowest level since the housing slump started in 2006.

The collapse of the US housing market was a major contributory factor to the credit crisis in 2007 and Toll's statement fuels hopes that the market is emerging from its trough.

The UK housing market is certainly showing signs of a recovery. Britain's largest landlord Grainger (33.5p better at 244.5p) yesterday said tough trading conditions in the residential sales market had eased in recent months, largely due to the release of pent-up buyers demand and low interest rates.

Grainger's comments followed news that mortgage approvals rose 23% in June to 455,000 with first-time buyers active. Taylor Wimpey improved 1.04p to 37.8p, Barratt Developments 2.3p to 216.75p and Redrow 4p to 188.9p.

Insurer Legal & General rose 2.3p to 64.9p amid vague talk that once Clive Cowdery's Resolution (3.75p up at 85.75p) digests its £1.9bn acquisition, Friends Provident (3p better at 76.1p), it will make a move on L&G.

Prudential climbed 11.6p to 477.9p on hopes for pleasing interims including an increase in the dividend.

It will be Mark Tucker's swansong as he steps down as chief executive next month to make way for finance director Tidjane Thiam who will become the first black chief executive of a Footsie company. As for Tucker, rumours have been rife that he will take a board position at his beloved Chelsea Football Club.

British oil & gas explorer Emerald Energy was top FTSE 250 performer, gushing 63p to 739p in response to an agreed £532m or 750p a share cash bid from China's state-run Sinochem Corporation. Gulfsands Petroleum, the other 50% owner and operator of the Syrian assets which Sinochem is buying, jumped 25.5p to 219.5p. The deal values Gulfsands' assets in Syria at more than £3 per share.

Bowleven, which in March received a cash offer of 150p per share from an unnamed concern, which was then swiftly revised downwards to £1 a share before the bidder then decided to walk, had some upbeat news for a change. The shares firmed 12.5p to 94p after the west African oil and gas explorer announced it has entered into a farm-out agreement with Vitol E&P Limited in respect of the Etinde Permit, Cameroon.

Reflecting disappointment with the in-line first-quarter trading statement, Micro Focus shed 20p to 380.1p.

Premiership football club Birmingham City scored a 10p gain at 50p following confirmation it had received another takeover approach from 29.9% shareholder Carson Yeung. The Hong Kong businessman retained a stake following an abortive takeover attempt in 2007.

Student accommodation provider Unite skipped 11p higher to 1851/2p on news of a joint venture with Bahrain's Oasis Capital Bank to develop student housing in London, worth an estimated £194m. Analysts were bullish because the deal helps Unite slash net debt by around £75m.

EMED Mining edged up 3/4p to 123/4p after shareholders at an extraordinary general meeting approved the board's plan to issue shares raising £2.9m. Funds will help the company restart mining at its Proyecto de Rio Tinto project in Slovakia.

After signing a manufacturing agreement with Nationgate Technologies of Penang, supercapacitor manufacturer CAP-XX added 2p at 17.5p. Seymour Pierce has a target price of 64p and expects further production news in the autumn.