Well-received manufacturing data from around the globe helped to send the FTSE 100 to its best level for three weeks.
A positive Chinese purchasing managers index in particular helped mining shares move higher, while US and European data showed an improvement, even if slightly less than forecast. A dip in the UK figures did not seem to disturb investors unduly. All eyes will be on the European Central Bank’s decision on interest rates and possible quantitative easing on Thursday, and the US non-farm payrolls a day later. There are hopes too that, despite the Chinese PMI, the country might soon take stimulus measures to boost its economy.
News of a restructuring at BHP Billiton also lifted the mining sector. BHP ended 38p higher at £18.82 as it said it was weighing a number of options to simplify its business, including a possible demerger of unwanted assets such as aluminium and nickel into a separate company said to be worth up to $ 20bn. Analysts at Numis said:
BHP…reiterates that “a portfolio focused on our major iron ore, copper, coal and petroleum assets would retain the benefits of diversification, generate stronger growth in free cash flow and a superior return on investment”. Increased focus on these four pillars with Potash as potential fifth pillar. Next phase of simplification under review. In BHP’s current portfolio, those 5 pillars basically leave aluminium, manganese and nickel as the elephants in the room in our view.
Elsewhere Rio Tinto rose 37.5p to £33.75 and Antofagasta added 4p to 839.5p.
Overall the FTSE 100 finished up 54.24 points at 6652.61, its highest since 11 March, while America’s S&P 500 hit a new intraday peak and France’s Cac reached its best level since 2008 during the day.
Aberdeen Asset Management climbed 26.2p to 416.5p as it said it planned to cut costs as subdued conditions in emerging markets meant a continuing outflow of funds. It said it was cautious on the outlook but had a strong pipeline of business.
A day after being unveiled as preferred bidder for a UK nuclear decommissioning project, and a week or so after announcing an expensive helicopter acquisition, Avincis, Babcock International gained 40p to £13.87 as it won a 21 year contract to manage the London Fire Brigade’s vehicle fleet.
Insurers continued to rebound after the badly handled news of a probe into pension and savings plans by the FCA watchdog. Prudential put on 48.5p to £13.17 while Aviva added 15.1p to 492.1p.
Reckitt Benckiser rose 19p to £49.06 after Morgan Stanley looked at the prospects for the company buying Merck’s consumer health business. It said:
We see Reckitt’s ongoing shift towards consumer health as key to a higher valuation for the stock, given the potential for increased growth and profitability. While the group has made impressive organic progress here, the potential for a step change through an acquisition would be a positive catalyst for the stock.
Among other bidders, Reckitt is reportedly the frontrunner to acquire Merck’s consumer health business. We think there could be a number of attractions: (i) Merck’s leading franchise in the allergy space, (ii) complementarity in cold/flu, (iii) potential for consolidating the Dr Scholl brand in the US, and (iv) Reckitt’s presence in the US would enable synergies.
Sports Direct International moved higher after a buy note from Liberum, which raised its target price from 850p to 950p and suggested a number of possible overseas acquisitions for Mike Ashley’s retail group. Ahead of Friday’s shareholder meeting to vote on Ashley’s new incentive package, and boosted by hopes it will benefit from sales of the new England shirts in World Cup year, Sports Direct added 40.5p to 892.5p.
But Tesco lost 2p to 293.4p as Espirito Santo issued a sell note while J Sainsbury, down 6.6p to 309.5p, was hit after Societe Generale cut its target price from 370p to 330p.
Morrisons‘ boss Dalton Philips may have waived his latest bonus after a poor performance from the supermarket group, but it has emerged he has just received £370,319 worth of shares relating to his bonus from 2011. He immediately sold £174,400 worth at 213.42p each to cover tax and national insurance. Morrison’s shares fell 2.2p to 210.8p.
Weir slipped 18p to £25.18 after the Scottish pump maker confirmed it had made an approach to Finnish rival Metso about an all share merger to create a company worth some £8bn.
Among the mid-caps FirstGroup fell 6.9p to 139p after Bank of America Merrill Lynch cut its rating and price target on the train and bus group, citing poor trading and the prospect of a cash call. The company reports results on Wednesday.