FTSE Close: Cairn & Vedanta lead the way

By Ed Monk for Thisismoney.co.uk
Updated: 12:14 EDT, 16 August 2010

17.00 (close)

Taking stock: Shares are looking at a flat start to the week.

Takeover moves provided the main interest for the London market today despite economic worries hindering progress for the wider FTSE 100 Index.

Investors welcomed Cairn Energy's plans to sell 51% of its Indian operations to Vedanta Resources for more than £5bn - promising a multi-billion windfall for shareholders.

But Aviva's rejection of a £5bn move for its general insurance arm by rival RSA was poorly received, leaving both down more than 2%. The Footsie crawled 0.7 points ahead to 5276.1 after being in the red for much of the session.

Dismal growth figures from Japan - showing growth slowing to 0.4% between April and June, suggested a stalling global recovery as the nation lost its place as the world's second biggest economy to Asian neighbour China.

A mixed session in Asia was followed by a sluggish start for the Dow Jones Industrial Average after housing and manufacturing data disappointed, although Wall Street crept into positive territory later.

The pound enjoyed a decent session against the euro, gaining to 1.22, and edged up to 1.57 against the dollar in a thin summer session.

'Aside from the Vedanta/Cairn India deal there was little around on the local agenda to provide much meaningful direction,' IG Index's senior sales trader Yusuf Heusen said.

In London shares in both firms headed the leaderboard on news of the deal, which could land Cairn Energy up to £5.5bn for the stake in its Indian arm. Cairn - which will retain a stake of at least 11% in the Indian business after the sale - added 24.9p to 493.2 or 5%. Vedanta was close behind, up 100p to 2153p.

The leading faller was Aviva, down 9.5p at 377.9p after snubbing RSA's proposal to buy its home and motor insurance operations in the UK, Canada and Ireland.

Aviva said it had no intention of splitting its general insurance and life assurance divisions, although it added that it was willing to address investor concerns over the company's strategy after recent underperformance of its shares. Suitor RSA saw shares dip 2.9p to 124.5p or 5%.

Meanwhile shares in oil giant BP were down as investors reacted to an announcement from the state of Alabama that it is suing BP and two other companies over the Gulf of Mexico oil disaster.

Shares in the beleaguered firm were 6.65p down at 409.75p, after the state said it was making the claim against BP, Halliburton and Transocean for the 'catastrophic harm' caused by the crisis. BP has made provisions of more than £20bn for the spill so far.

Communications provider Inmarsat's shares also shed 2.5p to 686p as challenging trading in its core maritime business continued to weigh on the stock.

The biggest Footsie risers were Cairn Energy up 24.9p to 493.2p, Vedanta ahead 100p to 2153p, African Barrick Gold up 13.5p to 562.5p and Xstrata up 18.4p to 1014p.

The biggest Footsie fallers were Aviva down 9.5p to 377.9p, RSA off 2.9p to 124.5p, RBS down 1.05p to 45.9p and Capital Shopping Centres off 5.3p to 320.9p.

16.00: That Vedanta/Cairn Energy deal has helped to push the FTSE 100 into positive territory.

Those two are the highest risers on the day - Vedanta 127p, or 6.2%, up at 2,180p and Cairn 28.2p, 6.02%, hgher at 496.50p.

The Footsie is now 12.06 points higher at 5287.5 with the close in sight.

15.00:

On Wall Street the Dow Jones opened lower, and has fallen 38.75 points to 10,264.4.

London shares are bumping along now, the FTSE 100 is 25.03 points lower at 5250.41.

13.40: The FTSE 100 is still below water, down 28.40 at 5247.04.

Overall, there are only 18 of the 100 blue chips in positive territory.

Notable movers today include communications provider Inmarsat's, whose shares were down 10.5p to 678p after evidence of challenging trading in its core maritime business in its first-half results last week continued to have an effect.

Financial services group Prudential and retailer Next were among the London market's risers, with their shares rising 8.5p to 561p and 26p to 1950p respectively.

11.30:

The Footsie has stemmed the sharp losses of this mionring as sits just 14.66 points lower at 5260.78 as luntime looms.

10.15: Top faller today is BP. The oil giant has slipped as fears grow of a monster legal bill in the US following the Guylf of Mexico oil spill.

Alabama is the first state to sue BP for damage from the world's worst offshore oil spill. The move stems from fear economic victims will be inadequately compensated and BP will shirk its financial responsibility, Attorney General Troy King said. 'That won't be the only legal action,' one trader added, ominously.

BP shares are 2% lower today - 8.5p lower at 407.9p.

10.10:

The FTSE 100 fell today with fears for the global economy outweighing firmer commodity prices that have helped the miners, and with BP and Aviva down.

A major deal in the oil and gas sector helped lift shares in early trading but further evidence of a slowdown in the global economy has pushed blue chips down. The FTSE 100 is currently 32.99 points lower at 5242.45.

Investors were cheered by Cairn Energy's plans to sell 51% of its Indian operations to Vedanta Resources for more than £5bn.

Shares in both companies made headway. Cairn Energy shares were 2% or 11.1p higher at 479.4p as investors eyes a one-off windfall in the wake of the India deal. Vedanta shares were 103p higher at 2154p.

This was despite a mixed session for Asia markets after a sharp slowdown in Japan's growth added to recent figures on the US and Chinese economies that suggested the global recovery is losing momentum.

The other major development of the session involved More Than owner RSA's interest in the motor and home insurance division of Aviva.

RSA shares were 1.4p lower at 126p after Aviva said it had no intention of splitting its general insurance and life assurance divisions.

The statement also looked to address concerns from shareholders about the company's strategy in the wake of the recent underperformance of Aviva's shares in recent months. The stock was 2.4p lower at 385p.

Sterling fell against the euro on Monday, pulling away from last week's six-week high with sentiment dented by a survey showing a fall in UK house prices in August.

The euro was 0.6% higher against sterling at 82.14p, recovering after hitting a six-week low around 81.75p on Friday.

The pound also turned lower against the dollar, erasing earlier gains as poor Japanese growth figures helped turn equities negative and weighed on sentiment towards riskier currencies.

A survey released overnight by property website Rightmove showed asking prices for homes in England and Wales fell by 1.7% in August after an oversupply of property coincided with a seasonal dip in demand.

Against the dollar, sterling was 0.2% lower at $1.5575 as UK shares fell 0.3%, though it stayed above a near three-week low of $1.5535 hit in early Asian trade.

Support is seen for the pound above its 200-day moving average - currently at $1.5504.