15.00: Modest early gains by US stocks following some mixed economic data together with a batch of takeover talk helped keep the Footsie positive in mid afternoon deals, although trading was light with many European markets shut for a public holiday.
With an hour and a half of trading to go, the FTSE 100 index was 20.8 points higher at 6,872.0, easing off the session peak of 6,88214 having earlier drifted as low as 6,848.06.
In opening trade in New York, the Dow Jones industrial Average gained 25.3 points, or 0.2 per cent at 16, 658.5, with the broader S&P 500 index up 0.3 per cent, and the tech-laden Nasdaq composite index ahead 0.4 per cent as investors shrugged aside weak US growth data and focused on a fall in weekly jobless claims.
US up: Early gains by US stocks helped keep the Footsie positive in thin afternoon trading.
The US economy contracted by 1 per cent in the first quarter of 2014, the biggest decline in three years, hampered by harsh winter weather, according to newly revised government figures.
Last month the Commerce Department had initially reported that US GDP was up 0.1 per cent in the first three months of 2014.
But the number of people who applied for US unemployment benefits last week was less than expected, falling by 27,000 to 300,000, the second lowest reading since the end of the recession in mid-2009.
Meanwhile, US consumer spending climbed 3.1 per cent higher in April, although that only was a touch higher than previously reported.
In London, Smith & Nephew was a top blue chip gainer, up another 4 per cent or 43.5p to 1,037.0p as bid interest continued to swirl around the medical devices firm after Kevin Lobo, chief executive of Stryker told Fox Business News that the US firm had been working on a bid for its rival.
Lobo said Stryker was at the preliminary evaluation stage when the UK Takeover Panel on Wednesday asked it to declare its intentions after a spike in S&N’s share price when the Financial Times reported Stryker was trying to line up financing for a potential bid.
Smith and Nephew’s shares initial jumped 18 per cent on Wednesday, but pared gains after Stryker issued a statement saying it had not made a takeover offer. Smith & Nephew shares still closed 4.3 per cent higher yesterday.
Engineering peer Weir Group was also higher, ahead 23.0p at 2,607.0p and bouncing back after falls yesterday after walking away from its pursuit of Finnish rival Metso, as chief executive Keith Cochrane told reporters that the company is still looking at other acquisition opportunities.
Some in the City also suggested that Weir’s failure to merge with Metso could make it a target for big players such as General Electric.
Fellow engineer IMI was also in demand, up 32.0p at 1,593.0p after broker UBS lifted its rating on the stock to buy from neutral, saying that growth rates at the group have the potential to double in the medium term.
Among other risers, supermarket giant Tesco gained 3.4p to 304.7p after completing a deal to create a joint venture with China Resources Enterprise, merging its Chinese operations with the largest food retailer in the country.
Traders said speculation surrounding a new round of Chinese stimulus measures was also a factor in the market’s strength. Strategists at Barclays said they see an ’increasing probability that more significant monetary easing (in China) … will be announced in the coming weeks’.
13.00: The Footsie held firm, close to session highs at lunchtime supported by some takeover chatter for Smith & Nephew as well as hopes for a firmer opening on Wall Street although much will depend on some key US growth data.
By mid session, the FTSE 100 Index was up 22.9 points at 6,874.1 just below the morning peak of 6,882.1, albeit in thin trading volumes with much of Europe enjoying a public holiday.
US stock futures pointed higher after a retreat yesterday awaiting a second reading for US first quarter GDP, with the economy now expected to have contracted.
Ploughing through: A second reading for US first quarter GDP is expected to show a contraction in an economy battered by harsh winter weather.
Jasper Lawler, market analyst at CMC Markets said: ‘Economic forecasts have swirled around violently with this upcoming GDP release, only a month ago they were as high as 1.1 per cent. The first estimate was 0.1 per cent, forecasters now average -0.6 per cent.
‘With the bar set so low, bias would appear to be for an upside surprise. The first quarter is largely being swept under the “cold weather” rug so even with the US economy having contracted in the first quarter, there’s a good chance the S&P 500 could again push into new territory on any positive surprise.’
In London, the UK blue chip index was led higher by further gains for medical equipment firm Smith & Nephew, up 42.0p to 1,035.5p following speculation yesterday about a possible takeover by US rival Stryker, despite a denial from the American firm.
Advertising agency WPP Group was also a good FTSE 100 riser, up 8.0p to 1,293.0p as broker Investec Securities upgraded its rating to buy from add, highlighting a boost from the failed merger of US and French rivals Omnicom and Publicis.
Investec analyst Stevel Liechti said in a note: ‘The Omnicom/Publicis attempted merger was an expensive distraction and disruptive for staff and clients, to the benefit of WPP in our view. While they both could fight back, strategic/management questions may continue/drag.’
But on the downside with blue chips, DIY stores group Kingfisher fell 20.2p to 397.1p after its first quarter profits disappointed investors despite a 9.7 per cent like-for-like sales rise for its UK chain B&Q thanks to better weather and a later Easter.
Though sales rose, changes in product mix and promotions hit margins in its UK operations while trading in France was held back by weak consumer confidence.
Chief executive Sir Ian Cheshire admitted that while the sales figures were encouraging, they largely reflected comparisons with a tough period last year. Analysts at Citigroup said the market was likely to trim full-year profit forecasts.
Meanwhile, housebuilders were under pressure following the publication of data on the Government’s Help to Buy scheme. Analysts said the initiative appeared to be having a limited impact.
Blue chip Persimmon was down 23.5p to 1,332.5p while top-flight rival Barratt Developments fell 7.2p to 361.7p, and in the FTSE 250, Redrow was 7.8p off at 270.4p and Taylor Wimpey dropped 2.2p to 109p.
Elsewhere, over-50s focused holidays-to-insurance group Saga ticked up 1.1p to 187.1p on its first full day of official stock market trading, after it floated at 185p last week.
10.05: The Footsie pushed higher as the morning session progressed, boosted by some underlying takeover chatter in the absence of much fresh for direction, although DIY retailer Kingfisher was a big faller after disappointing results.
By mid morning, the FTSE 100 index was 15.6 points higher at 6,866.8, tracking gains overnight by Asian markets, with other European bourses subdued as a number were closed for Ascension Day holidays.
With no key UK economic pointers due for release today the main focus was on data due from the US, including the second reading for first quarter GDP, as well as the build-up to next week’s interest rate announcement from the European Central Bank.
Profits disappoint: DIY stores group Kingfisher saw a 20 per cent jump in first quarter profits disappoint as investors had expected a stronger lift in sales from the warmer weather.
Takeover speculation provided the main boost for the Footsie, with medical products group Smith & Nephew and pumps manufacturer Weir Group both in focus again.
Artificial joints form Smith & Nephew was a good blue chip performer, up 27.5p to 1,021.0p, extending gains made yesterday 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.
Engineer Weir Group was also a strong gainer, adding 17.0p to 2,601.0p a day after it abandoned efforts to acquire Finnish company Metso, which had rejected UK’s firm’s second, improved takeover bid.
Traders said a failure to merge with Metso could make Weir, already frequently the subject of takeover speculation, a target for bigger players such as General Electric or Honeywell.
Takeover activity also boosted hedge fund manager Man Group, shares in which gained 4.5p at 99.3p after it confirmed it was in talks to buy US asset manager Numeric Holdings.
Earnings were also a focus, with the main picture mixed.
B&Q owner Kingfisher was the biggest FTSE 100 casualty, dropping 6 per cent, or 25.1p to 392.2p as a 20 per cent jump in first quarter profits by Europe’s biggest home improvements retailer disappointed investors who had expected a stronger lift in sales from the warmer weather.
Analysts at Oriel Securities said in a note: ‘Despite excellent LFL sales, the Q1 IMS is a shade disappointing. UK margin investment has held back EBIT there and in “other International” some losses are worse than we feared.’
The sentiment rubbed off on FTSE 250’s Home Retail Group, owner of DIY rival Homebase, where shares fell 2.6p to 194.2p.
But blue chip food ingredients firm Tate & Lyle managed to gain 25.0p at 699.5p after it posted an as expected drop in profits, hit by a fall in price for its sucralose sweetener and a weaker appetite for soft drinks in the United States.
And water company Severn Trent added 5.2p at 1,938.2p after reporting a forecast-beating 7 per cent rise in annual underlying pre-tax profit to £269.1million.
Elsewhere, Centrica gained 3.6p at 334.4p after confirming the departure of British Gas boss Chris Weston.
Shares in temporary power firm Aggreko, where Mr Weston is to become chief executive shed 49.0p to 1,700.0p.
08.30: The FTSE 100 has opened just 3.4 points higher at 6,854.7 on what looks set to be a quiet day on the markets.
Traders are already pondering the prospect of new economic stimulus measures from the European Central Bank, although it is not due to meet for another week.
Other European news is thin on the ground at the moment, but the US will release its latest estimate of first quarter GDP and and weekly jobless claims this afternoon.
Market watch: Traders are speculating about whether the ECB is ready to unveil new stimulus measures after its meeting next week
‘The European calendar is relatively light today with bank holidays for France and Germany,’ said Stan Shamu, market strategist at IG. ‘Any comments by officials will continue to be watched closely as investors anticipate action from next week’s meeting.
‘ECB executive board member [Yves] Mersch was on the wires reinforcing the notion that measures will be announced next week.
‘Many analysts now feel we’ll hear measures that contain a combination of measures possibly including an LTRO [long term refinancing operation, a cut-price loan scheme for the region’s banks] and rate cuts.’
The FTSE 100 closed up 6.28 points at 6,851.22 yesterday, leaving it just 0.6 per cent shy of its high for the year.
Stocks to watch today include:
KINGFISHER: The home improvement retailer posted a 20 per cent surge in first quarter retail profit and said it would pay a £100million special dividend as part of new plans for extra shareholder rewards.
SEVERN TRENT: The water company reported a 7 per cent rise in annual underlying pre-tax profit to £269.1million, beating the consensus City forecast.
TATE & LYLE: The food ingredients firm reported lower full-year earnings after it was hurt by a dramatic drop in prices of its sucralose sweetener and weak sales of soft drinks in the US.
MAN GROUP: The hedge fund manager said that it noted recent press speculation and confirmed it was in talks over a possible acquisition of Numeric Holdings.
ELECTRA: The private equity firm reported a 5 per cent rise in net asset value per share to 2,914 pence in the half-year to the end of March 2014 and said it had seen a record level of investment for a six-month period.
ROLLS-ROYCE HOLDINGS: The industrial group won a contract worth £35million to design and equip a large offshore support vessel for Norwegian ship owner Island Offshore.
CENTRICA/AGGREKO: Centrica said that Chris Weston, the head of its international downstream division, would leave the company to become the new chief executive of power provider Aggreko.
Meanwhile, Sky News reported that the chiefs of British Gas and parent company Centrica were close to stepping down as part of a management shake-up at the energy supplier.
LLOYDS BANKING GROUP: The bank has hired a female KPMG partner to head its audit operations as the state-backed group attempts to increase the number of senior female executives, Sky News reported.
MITCHELLS & BUTLERS: The pubs group has entered exclusive talks to acquire rival Orchid pub company for more than £250million after outbidding private equity firms Colony Capital and Starwood Capital, The Times reported.