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Markets Monday: Bids boost FTSE, gold gains

Created:

14 July 2008

Written by:

Jonathan Eley

London equities rose on Monday, energised by news of a bid approach in the financial sector. There was also widespread relief at the US government’s rescue package for mortgage entities Freddie Mac and Fannie Mae. The FTSE 100 rose 1.6 per cent to 5,342.0, although it remains in bear market territory.

Alliance & Leicester surged 45 per cent to 318.8p after the mid-cap mortgage lender said it was in advanced talks about an offer at 299p a share, believed to be from Santander of Spain. Bradford & Bingley, seen as another likely candidate for a deal, rose 32 per cent to 62½p.

Lloyds TSB led the rest of the sector, rising 2.5 per cent to 282.3p, interdealer broker Icap ran it a close second up 2.8 per cent at 427p and HSBC rose 2.2 per cent to 748½p.

The improving sentiment saw shares in London Stock Exchange rose 2 per cent to 711½p. Royal Bank of Scotland, which was also reported to have ruled out any sale of its stake in bank of China, rose 2.5 per cent to 187.2p.

Reports that Endemol, the independent TV production company behind Big Brother and Deal or No Deal, was considering buying ITV, saw shares in the commercial broadcaster rise 7.5 per cent to 41.4p.

There was further bid news in the oil and gas sector. Imperial Energy, the developer of Russian oil reserves, confirmed it was the subject of a takeover approach and rose 23 per cent to 950.3p. The brief statement came after the Times of India reported that ONGC, the Indian state-run oil group, had made an offer.

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MARKET DATA

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OVERSEAS MARKETS

Most Asia-Pacific markets slipped on Monday, as the US government’s rescue plan for Freddie Mac and Fannie Mae only served to hammer home just how serious the credit crisis had become. Australian stocks slid 1.2 per cent to 4,921.0, hit mainly by the banks. Over in Hong Kong, the Hang Seng lost 0.9 per cent to 21,978.55, while the index of mainland Chinese companies traded in the territory slipped 0.6 per cent to 12,239.13. Japanese stocks closed down, with the Nikkei 225 down 0.2 per cent at 13,010.16. Shanghai bucked the trend, with a steady 0.8 per cent gain to 2,878.256. Manila gained 0.8 per cent to 2,457.27.

COMMODITIES

Aluminium prices hit a record this week as China, the world’s biggest producer, ordered smelters to reduce production because of power shortages. Lead surged from a one-year low as falling stocks prompted traders to cover short positions. Gold rose 2.7 per cent to $957.50 a troy ounce. Silver was up 3.5 per cent to $18.68. Agricultural commodities retreated from recent highs, with corn, soyabeans and wheat all losing ground. Oil remains primed for an assault on the $150 a barrel level, although volatility in crude futures remains unprecedented.

FOREIGN EXCHANGE

The dollar slid last week as the euro rose to a three-month high of $1.5946 to sit less than a cent below its record peak of $1.6018, set in April. Analysts blamed some of the dollar's fall on the drop in Fannie and Freddie's share prices amid further distress in the US financial sector.

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