FTSE soars close to 14-year high on back of speculation over mergers
Britain's top share index edged higher to trade near a 14-year high yesterday, with takeover speculation surrounding companies such as Smith & Nephew (S&N) and Weir Group lifting investors' appetite for riskier assets.
The FTSE 100 index hovered just below the 14-year high scaled earlier this month and was just 2 percent off a record peak set in 1999.
Medical-devices manufacturer Smith & Nephew was the top performer in the FTSE 100 index, up 4.2pc, extending Wednesday's gains after a press report of a planned takeover bid from US rival Stryker.
Although Stryker denied it was planning a bid, traders said the return of takeover speculation would continue to support S&N shares in particular and the broader market in general.
"The improving economic backdrop and the pick up in business confidence are likely to be supportive for a pickup in M&A activity," said Robert Parkes, equity strategist at HSBC.
"In addition, valuations are not stretched and there appears to be an element of pent up demand as a result of the depressed level of deal activity we have seen over the last few years."
Engineering company Weir Group was also a strong gainer, up 1.6pc, a day after it abandoned efforts to acquire rival Metso. The Finnish company had rejected Weir's second, improved takeover bid.
Bankers have said a failure to merge with Metso could make Weir, already frequently the subject of takeover speculation, a target for big players such as General Electric or Honeywell.
Kingfisher, Europe's biggest home improvement retailer, was down 5.1pc even though the group reported a 20pc rise in first quarter retail profit and said it would pay a £100m (€73m) special dividend.
Water company Severn Trent, meanwhile, reported a 7pc rise in annual underlying pre-tax profit to £269.1m, beating the analyst consensus. The water supplier also said it was paying a dividend for the 2013/14 financial year. (Reuters)