London close: Two-month high on US rate hopes
After a lacklustre day, London's blue chips leapt into action in the afternoon, buoyed singularly by a strong advance on Wall Street.
US stocks jumped after the Commerce Department said GDP grew 2.5% in the second quarter, against expectations of a 3% growth, raising hopes of an end to interest rate hikes.
At one point during the session the FTSE 100 came within about 150 points of the five-year high seen in May.
Mining giant Xstrata led the risers after Inco decided to pull out of the running to buy Canadian miner Falconbridge in order to focus on a merger with Phelps Dodge. Xstrata raised its cash bid for Falconbridge last week to C$62.50 per share.
Prudential was the worst performing blue chip after the life insurer released interim figures that revealed a weaker than expected performance from its UK business.
The group announced a 17% rise in pre-tax profits, in line with expectations, but traders focused on a 12% decline in the UK insurance business and a loss at its online bank Egg.
Hotel giant InterContinental was also sharply lower, as it fell in sympathy with US peer Starwood after strong second quarter were overshadowed by a poor outlook warned of a soft second half.
Drug group Shire was marginally weaker despite reporting a good pipeline of drugs for the current year as it said it was keeping its guidance unchanged.
SABMiller, the international brewer, said it was continuing to make progress with strong trading conditions in its newly acquired South American businesses. The group's South Africa lager volumes were up 3%. Soft drink volumes grew 4%.
UK mortgage lender Alliance & Leicester recovered from an early fall after it reported a "satisfactory" set of half year results and said it was on track to achieve its strategic objectives for the year. Core profits came in 1.5% lower.
Pay-TV satellite broadcaster BSkyB travelled north after posting an 8% increase in year-end revenue to £4.1bn with pre-tax profits rising marginally to £798m from £787m previously.
The group said total number of direct-to-home digital satellite subscribers in the UK and Ireland was 8.17m - a growth of 77,000 in the final quarter and 389,000 in the year.
Water giant United Utilities barely moved on news that current trading is in line with expectations and it is increasing its dividends.
Boots and Alliance UniChem were two of the strongest risers ahead of their merger, due to take place after the close today. The combined group, Alliance Boots, will begin trading on Monday.
Electrical retailer DSG International has sold its 60% majority stake in The Link mobile phone store chain to O2 for around £30m in cash, adding to the mobile group's existing 40% interest.
In other M&A activity, McCarthy & Stone was better after the retirement homes builder said it has agreed an increased offer of 1,030p per share from a bid vehicle led by Permira and Barclays Capital worth some £1.059bn.
Sanctuary, the troubled music group, announced that having met with potential suitor MAMA it has ended all talks after concluding that the approach was without merit. MAMA has already said it is prepared to go hostile.
Telecoms equipment group Telspec slumped after it said it was no longer actively looking for a buyer and announced the resignation of two of its directors.
Elsewhere, QinetiQ traded higher as the hi-tech defence firm said today, as it confirmed that the outlook remains in line with that set out at the final figures in June.
Kingston Communications has seen a robust start to its new financial year, the telecoms firm said today, with the momentum created in the second half of last year continuing in to the first quarter.
FTSE 100 - Risers
Xstrata (XTA) 2,301.00p +7.47%
Boots (BOOT) 806.50p +4.40%
Alliance UniChem (AUN) 1,068.00p +4.09%
Northern Rock (NRK) 1,145.50p +3.52%
Vodafone (VOD) 119.25p +3.25%
BSkyB (BSY) 564.00p +2.55%
SABMiller (SAB) 1,071.00p +2.54%
Smiths Group (SMIN) 918.00p +2.46%
British Energy Group (BGY) 735.00p +2.37%
3i (III) 931.50p +2.19%
FTSE 100 - Fallers
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InterContinental Hotels Group (IHG) 858.50p -4.61%
Prudential (PRU) 577.50p -3.02%
PartyGaming (PRTY) 111.75p -1.32%
BAE Systems (BA.) 357.25p -1.31%
Wolseley (WOS) 1,139.00p -1.13%
Royal & Sun Alliance (RSA) 136.00p -0.73%
Smith and Nephew (SN.) 459.50p -0.70%
Brambles Industries (BI.) 439.75p -0.68%
Compass Group (CPG) 257.25p -0.58%
Persimmon (PSN) 1,271.00p -0.55%
FTSE 250 - Risers
SCI Entertainment (SEG) 440.00p +4.51%
Aggreko (AGK) 282.00p +3.87%
Viridian Group (VRD) 1,038.00p +3.85%
Slough Estates (SLOU) 680.00p +3.82%
JP Morgan Fleming Japanese Inv Trust (JFJ) 256.50p +3.43%
McCarthy and Stone (MCTY) 1,075.00p +3.37%
Gyrus Group (GYG) 338.25p +3.28%
United Business Media (UBM) 634.50p +2.67%
Hays (HAS) 133.75p +2.49%
Expro International (EXR) 650.50p +2.44%
FTSE 250 - Fallers
Inmarsat (ISAT) 313.25p -5.08%
Amec (AMEC) 284.25p -3.73%
Northern Foods (NFDS) 84.00p -3.45%
Speedy Hire (SDY) 920.00p -3.16%
Aquarius Platinum (AQP) 898.50p -2.86%
Savills (SVS) 525.00p -2.60%
888 Holdings (888) 153.00p -2.55%
Marshalls (MSLH) 318.00p -2.45%
HMV Media (HMV) 160.00p -2.44%
Laird Group (LARD) 354.00p -2.34%
