UK stocks ended higher on Friday after a volatile day as investors cheered news that Vodafone's planned to quit Japan, and BT Group rose on bid talk. But the market was shaken by a revenue warning from chip maker Intel.
Vodafone jumped 6 percent late in the session as the world's biggest mobile operator said it was in discussions to sell its struggling Japanese business to Internet communications group Softbank.
"I think it's a hugely positive signal," said one Vodafone investor, who asked not to be identified. "This will relieve some of the pressure on them to get out of the US"
The rise in Vodafone, one of Britain's biggest stocks, gave the FTSE 100 index a massive boost, accounting for nearly all of its 25.7 point rise to 5,858.7 by the London close.
The FTSE had earlier fallen sharply along with Wall Street on a lower revenue forecast from technology bellwether Intel, but analysts said the effects of Intel's downbeat outlook were likely to be short lived as the overall earnings season had been largely positive.
"Looking at the broader market, I think it's beaten expectations," said Robert Parkes, UK equities strategist at HSBC Securities, who has a target of 6,100 points on the FTSE.
"If you look at analyst earnings revisions, they've been busily revising up their expectations for companies so I think that's a very positive indicator."
Bid talk continued to be a key driver for the market, with shares in BT Group, BAA and Cairn Energy all finishing among top blue chip gainers on hopes of take-over offers coming their way.
Airports operator BAA jumped 3.5 percent as sources familiar with the matter said it could get an approach from Spanish construction group Ferrovial as early as next week. BT finished up 6 percent after the Times newspaper reported Britain's largest fixed-line telecoms company could attract a 20 billion pound offer from private equity firms.
BT dismissed the report as speculative and said it had not received a bid.
Oil explorer Cairn rose 1.9 percent after India's state-run Oil and Natural Gas Corp said it was eyeing the Indian assets of the UK firm. Analysts have valued the assets at more than 2 billion pounds.
Consolidation hopes also filtered through to stocks long seen as potential targets, including broadcaster ITV and telecoms firm Cable & Wireless, up about 2 percent each.
On the downside, Asian-focused bank Standard Chartered fell 2.6 percent after a downgrade from J.P. Morgan. "We are downgrading our recommendation to neutral on full valuations. The only reason to hold the stock from here on is bid speculation," the bank told clients in a research note.
Concerns over an imminent smoking ban in England and a cautious outlook from mid-cap pubs operator JD Wetherspoon also pressured pubs stocks. Investment bank Dresdner Kleinwort Wasserstein cut its ratings on several in the sector, including JD Wetherspoon and Greene King, down over 4 percent each.
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