Market report: Friday close
The thought that the London Stock Exchange's value has sunk to a level that could once again tempt bidders sparked a flurry of interest and sent its shares racing to the top of the FTSE 100 leaderboard.
The Evening Standard's Sarah Marks
A note by respected analysts at Sanford Bernstein in New York points out that the LSE, up 55p at 1134p, has fallen by almost 50% since the beginning of the year, and is now 'well within reach of Nasdaq and NYSE Euronext'.
Sanford also suggests that the LSE is possibly overstaffed and overspending, and the potential for a buyer to make serious cost savings is another good reason to buy.
Its analysis comes a week before the LSE is expected to reveal a 50% rise in full-year profits, and the combined effect saw shorted holders scrambling to build up their positions ahead of the announcement. The Exchange has been enjoying record trading which, with revenues from Borsa Italiana, should see operating profits of about £279m against £186m last year.
Blue-chip shares made serious advances across the board, with investors warming to British Airways' 45% profit uplift. The FTSE 100 index was as high as 6348.6 at one point but a subdued opening on Wall Street pulled it back to 6304.3, up 52.5 points.
With just a handful of fallers, the strength of the market took some by surprise. Much of the buying was put down to major players trying to cover short positions, particularly in British Airways, up 9p at 233p, and in Johnston Press, up 6¾p at 125¾p. The Dow was down 42.2 points at 12,950.5.
Mining stocks were again the backbone for the Footsie's performance, aided by rising commodity prices. Rio Tinto's performance this week has been little short of astonishing: a jump today of 47p to 7071p put it up 10% on the week, before the volatile stock ended up falling 54p to 6969p.
The possibility that Chinese investors are keen to buy stakes in the big miners is providing another reason to buy. The story from Australia today was that Chinese interests have asked a major pension fund to help them buy a 9% stake in BHP Billiton, which originally put it up 7p at 2174p, before it too fell of by 16p to 2158p.
Cigarette manufacturers were boosted by a timely note from Morgan Stanley, reminding punters of their defensive qualities. Its top pick is Imperial Tobacco, up 52p at 2602p, which it rates overweight with a target price of 3050p, suggesting the shares could rise by 20%. It reckons consolidation is benefiting pricing trends, and estimates 'double-digit earnings per share growth for all European tobacco stocks in 2008-9'.
Satellite maker Inmarsat was chased up 8½p to 475½p on vague talk of a bid, possibly from private equity or a major US player, pitched at about £6 a share.
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The difficulties of consolidation among smaller brokers and boutique banks was highlighted today as Cenkos Securities' mooted £30m takeover of Arden Partners fizzled out just a week after Blue Oar abandoned its attempt to buy brokerage WH Ireland.
Consolidation may seem inevitable in the current climate, but the downturn in broking business is making it near impossible for the parties to agree on valuations. Arden, unchanged at 126p, today said talks with Andy Stewart's Cenkos have ended, but confirmed it has received preliminary approaches from other parties.
Cenkos, off 5p at 190p, admitted earlier this month that it was in talks over a £30m takeover of the smaller Arden.
Blue Oar last week abandoned a move on WH Ireland, 1p ahead at 111p after management refused to meet it. Ambitious Blue Oar, unchanged at 14p, could well be one of the other parties mentioned by Arden.
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