FTSE Close: Aviva, TUI Travel up; Vedanta down

By Adrian Lowery
Updated: 12:19 EDT, 13 August 2010

17.10 (close)

Insurance giant Aviva leapt to the top of the FTSE 100 risers board today after news of a reported takeover approach for the group's general insurance arm.

The interest from More Than insurer RSA - thought to value the business at around £5bn - was immediately rejected by the Aviva board and no discussions are currently taking place, Sky News said.

This did not stop investors piling into Aviva shares on the possibility of consolidation in the sector, while the wider FTSE 100 Index also closed the week in positive territory with a 9.4 point rise to 5275.4.

But the Dow Jones Industrial Average in America slipped into the red as persistent worries over the health of the global economy offset better news in Europe and the US.

US retail sales rose 0.4% in July - an improvement after two months of sales declines, although slightly below economist forecasts for a gain of 0.5%.

There was also some better news on US consumer sentiment, with the latest figures coming in above expectations, although this failed to soothe investor nerves after the Federal Reserve's gloomy economic assessment earlier this week.

In London, stocks were given added support after Germany posted better-than-expected GDP growth of 2.2% during a strong second quarter for exports.

The performance offered some reassurance for investors in the UK, which will need to see an improved eurozone in order to stimulate its own exports.

However, the euro weakened as markets focused on wider eurozone concerns, helping sterling rise to a six week high at 1.22 euros.

Among stocks, Aviva was the stand out performer, up 20.1p to 387.4p, or 5%.

TUI Travel was another strong riser after Goldman Sachs upgraded the stock to buy and did the same for rival Thomas Cook.

Despite profit warnings from the pair earlier in the week, Goldman said the valuations of the companies were compelling and noted that winter bookings were proving resilient. It added that factors affecting trade this summer were unlikely to be repeated next year.

TUI shares rose 8.6p to 201.2p, but Thomas Cook gave up its earlier progress to stand 0.4p lower at 176.9p in the FTSE 250 Index.

Other blue-chip risers included Legal & General, which added 2.9p to 90.8p on the back of the insurance consolidation talk.

However, the prospect of a City fundraising for the possible £5bn spending spree by RSA caused its shares to fall 1.1p to 127.4p.

The biggest fall in the FTSE 100 came from Vedanta Resources, which dropped 6% - down 128p to 2053p - as it closed in on a majority stake in Cairn India.

There were also further losses for Manganese Bronze after the London black cab maker said that its Chinese joint venture partner had pulled out of financing plans that would have seen it take a controlling stake in the group.

Shares plunged 11% yesterday and were down by another 17% or 7.5p to 37.5p today.

The biggest Footsie risers were Aviva up 20.1p to 387.4p, TUI Travel ahead 8.6p to 201.2p, Cairn Energy up 15.5p to 468.3p and Legal & General up 2.9p to 90.8p.

The biggest Footsie fallers were Vedanta Resources down 128p to 2053p, Wolseley off 42p to 1329p, Home Retail Group down 4.8p to 215.2p and Next off 42p to 1924p.

12.45

The biggest faller in the FTSE 100 index is now Vedanta Resources, which dropped 6% - down 122p to 2059p - as it closed in on a majority stake in Cairn India.

11.15

The FTSE 100 index has reversed to stand 28.9 points down at 5,237.2.

More smaller cap movers:

Billing Services Group share are down 15% after the telecoms services firm forecast weak second-half results.

'Billing Services looks cheap, but the market has concerns about the longevity of its core business,' says Evolution analyst Philip Sparks, keeping his 'buy' rating on the stock.

Discovery Metals, meanwhile, is 9.4% higher after the miner said the initial reserve estimates for its flagship Boseto copper project in Botswana were 24.1m tonnes, the majority for high-grade copper.

10.30

In small caps:

Ceramic Fuel Cells have risen more than 10% after the Melbourne-based company receives an order for its gas-to-electricity unit from Japan's Mitsui on behalf of Tokyo Gas.

Nomura analyst John-Marc Bunce has a 'buy' rating on the stock, and said these orders validate the value perceived in Ceramic Fuel's technology and keeps his price target of 21p.

Loss-making carmaker Manganese Bronze, which builds London's black cabs, falls 20% as it said it may need to look for a new investor after Chinese group Geely Automobile decided not to buy a £14m controlling stake.

09.30

An insurance sector takeover bid and encouraging growth data from the major European economies gave some confidence to the fragile London market today.

The FTSE 100 index was 24.1 points higher at 5,290.1, after Germany's economy was shown grower faster than expected at 2.2% in the second quarter. French GDP growth also exceeded forecasts.

But typically for August trade was thin and market participants saw little prospect of the market breaking out of its current range until the end of the holiday period.

'We are range-bound between 5,200 and 5,500 and there is not likely to be a break out until trading is back to normal in September,' said Tim Whitehead, investment manager at Redmayne-Bentley.

Technical indicators for the FTSE 100 index remained bearish, according to Raghee Horner, chief market analyst at Autochartist. The index needs to rally past 5,320 before the intraday trend will be shifted higher, he said.

Reports of a bid from bid More Than insurer RSA for Aviva's general insurance arm caused shares in the blue-chip company to rise by more than 4%.

The approach was immediately rejected by the Aviva board and no discussions are taking place, Sky News said.

However, the possibility of consolidation in the sector was enough to push Aviva shares 17.2p higher to 384.5p and led to a rally for other players in the insurance sector.

Life and pensions firm Legal General added 2.2p to 90.1p and Standard Life cheered 4.3p to 208p. However, the prospect of a £5bn spending spree by RSA caused its investors to run for cover as its shares fell 2p to 126.5p.

The biggest rise in the FTSE 100 Index came from TUI Travel after Goldman Sachs upgraded the stock to buy and did the same for rival Thomas Cook.

Despite profit warnings from the pair earlier in the week, Goldman said the valuations of the companies were compelling and noted that winter bookings were proving resilient. It added that factors affecting trade this summer were unlikely to be repeated next year.

TUI shares rose 11.9p to 204.6p, while Thomas Cook added 4.6p to 236.6p in the FTSE 250 Index.

Among fallers, BAE Systems lost 2.9p to 309.8p after UBS downgraded its rating to 'neutral' from 'buy' and cut its price target citing market doubts about defence spending.