Britain's top shares accelerated to a fresh 2-1/2 year high and extended this month's rally to more than 4 percent on Tuesday as BG Group highlighted how much gas and oil firms are benefiting from high prices and a clutch of firms including sugar and sweetener firm Tate and Lyle were boosted by favourable analyst assessments.
National Grid was among the biggest gainers with a 2 percent rise to 544-1/4 pence after Credit Suisse First Boston lifted its price target on the electricity firm to 593p and said the shares could be worth as much as 670p - offering 23 percent upside potential - if it increased its leverage, sold its metering assets and cut its US costs.
The FTSE 100 share index closed up 17.1 points, or 0.3 percent, at 5,058.9, gaining traction after a lacklustre start and hitting 5,065.7 in late trading, marking the 12th day in a row the index has posted its highest intraday level since June 2002.
The advance was aided by a firm start on Wall Street and was broad based, with oil stocks, miners and utilities all gaining ground.
Tate & Lyle added 1.9 percent after ABN Amro upgraded its rating on the stock to "add" from "hold" and applauded its shift to more added-value products, notably its sugar substitute Splenda/sucralose.
"The increasing focus upon added-value products should improve the quality and quantity of future profits. We believe the market has yet to price in the full potential of sucralose," the Dutch bank said.
Telecoms stocks were led higher by Cable & Wireless, up 2.5 percent after hitting an 8-month high on a combination of the restart of its share buyback programme, decent recent results and a big chunk of 19 million shares changing hands.
Dealers said talk that France Telecom was casting an acquisitive eye on C&W had also helped the recent rise, although they said that made it just one of several rumoured bid targets in the FTSE 100.
While there have been a host of midcap deals, however, the last deal agreed for a blue chip name was for Abbey National last July. "It's the year of the bid speculation," one dealer said.
Dealers said that, if no bids materialise, many stocks could be vulnerable to a correction, and cigarette firm Gallaher and sweets maker Cadbury both lost ground as bid talk, which had lifted their shares last week, faded.
Shares in BG rose 1.9 percent after the company reported a better-than-expected jump in net profit for the fourth quarter and raised its 2006 production targets.
GlaxoSmithKline firmed 1.1 percent after WestLB upgraded its rating on the drug industry major to "neutral" from "underperform", while Pearson added 2.3 percent as Investec said the publisher should soon show improving revenue and margins.
But brewer SABMiller dropped 1.1 percent on talk it may bid for a stake in privately owned Russian regional brewer Krasny Vostok. A Russian newspaper article quoted analysts as saying the stake could be worth up to $1 billion.
Data showing UK inflation remained steady last month had a muted impact. The release of the Bank of England's Inflation Report on Wednesday is expected to provide clearer insight into whether domestic interest rates will rise another notch, while clues on the direction of US rates should be provided by Federal Reserve Chairman Alan Greenspan later in the week.
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