Britain's FTSE 100 ended near 2-1/2 year closing highs on Monday as a fresh wave of take-over talk swept through the market, led by continued speculation over blue chip fund firm Amvescap on the eve of its annual results, while the mid-cap focus was sharply on retailer Woolworths, with its shares up by more than a fifth after a venture capital group admitted it was eyeing the chain. Several other smaller stocks were also named as potential bid targets by dealers, including aviation services firm BBA and music group EMI.
The market was further underpinned by firm banking stocks such as Standard Chartered, up on press reports that Barclays, HSBC and Citigroup might pick up a stake in the Asia-focused bank.
The final scores left the FTSE 100 up 19.5 points at 4,852.3 - just a few points shy of a fresh 2-1/2 year closing high. The move mirrored a positive start on Wall Street, where the Dow Jones Industrial Average was up about 60 points by the time London markets closed. Analysts said they expected UK stocks to continue making progress in the short term but cautioned that a rough ride could be in store later in the year if interest rates rise more than anticipated.
"Profits growth is strong and healthy so that's helping the market. But as we move through the year, we might encounter a few more headwinds associated with tightening monetary policy," said Tom Copland, a portfolio manager at Aegon Asset Management.
Anglo-American fund firm Amvescap was the top blue chip gainer for a second straight session as talk continued to circulate that the company might attract a take-over bid. The shares finished up 5.9 percent, near their best level since last July, as dealers said they were afraid of being left out in the cold when Amvescap reports annual results on Tuesday.
"The last thing you want to be ahead of these figures is short," one dealer at a London investment bank said. On Friday, dealers said French bank Societe Generale might bid for the UK firm. Amvescap, which was also upgraded on Monday to "buy" by analysts at Smith Barney, is expected to report a drop in full-year profits.
Airline British Airways was also high up on the gainers list with a 2.2 percent hike, tracking a drop in crude prices after the Iraqi election passed off without disruption to oil exports and as a cold weather snap in the US started to ease. Elsewhere in the sector, Irish carrier Ryanair put on 7.5 percent after the no-frills airline raised its full-year outlook and reported a much smaller fall in third-quarter profit than expected.
Mid-cap stock Woolworths was the star of the FTSE 250 mid-cap index, surging 22 percent after private equity firm Apax Partners said it was considering buying the British variety retailer.
"Clearly the past 12 months of aborted take-over bids for M&S and WH Smith demonstrates that there is a long way from an initial approach to a bid being successful, but we hope that the expression of outside interest in Woolworths is evidence that even in spite of a poor Christmas, Woolworths has been undervalued," said analysts at Charles Stanley.
Aviation services group BBA also featured highly among smaller players, up 10.4 percent on talk that it might find a private equity buyer for its non-woven business, while in the telecoms sector Marconi rose nearly 6 percent after signing a distribution alliance with China's Huawei Technologies, providing each new access to the other's markets.
On the downside, radio group Chrysalis continued to stumble after revealing it was bringing in a new breakfast show host at Heart 106.2, its flagship London station. The move came after listening figures earlier this month showed Chrysalis was losing market share in London. Analysts at Bridgewell said the "inevitable audience volatility" and increased marketing budget associated with the swap meant the brokerage was cutting its profit forecasts for Chrysalis for the fifth time in the past 12 months. The shares finished down 3.3 percent.
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