Deal activity overshadows euro zone debt woes as Footsie rises higher

FTSE:5,948.30 (+16.13) Mid-250:11,676.44 (+40.07) Small-Cap:3,260.42 (+14.10)

SHARES IN London jumped at the open yesterday thanks to a flurry of merger and acquisition activity, overshadowing the problems of euro zone debt and unrest in Libya and the Middle East.

Resource stocks were among the most actively traded, helped both by high prices on commodity exchanges and a rising number of deals keeping investor interest firmly on the oil and metals sectors.

“We expect the market to take this transaction positively as it will clean up Tullow’s balance sheet and allow this major project to proceed,” said Richard Rose at Oriel Securities.

Meanwhile, small-cap rival Hardy Oil Gas remained in demand following rumours on Tuesday that it could become the target of one of the major producers. Its shares gained a further 4.4 per cent to 189p after rising more than 9 per cent in the previous session.

Rio Tinto led the miners after its offer for Riversdale Mining, the Australia-listed coal producer, was declared unconditional.

Rio, which already owns 41 per cent of the shares in Riversdale, aims to take out smaller shareholders so it can push its holding up to 47 per cent and gain full control of the company.

Rio Tinto shares gained 2.1 per cent to £44.56, helping push the sector higher, as BHP Billiton added 2.3 per cent to £24.69.

Vedanta Resources climbed 3.4 per cent to £23.14 after Morgan Stanley said the stock had the potential to rise as much as 64 per cent.

Overall, the FTSE 100 climbed 16 points, or 0.3 per cent, by the close to 5,948.3, creeping back towards the 6,000 it last stood above nearly four weeks ago.

Dixons fell 18.3 per cent to 13.69p after warning that full-year earnings would miss market estimates because of weakening consumer confidence.

The UK’s largest electronics retailer said that sales at stores open more than a year had fallen 7 per cent in the first 11 weeks of 2011.

Bellway, a house builder, rose 4.4 per cent to 712p after reporting a 26 per cent increase in full-year profits, thanks to rising house prices. Although the company sold slightly fewer units in the previous year, the average price achieved rose by 8 per cent to £168,428.

The company also raised its dividend to 3.7p a share from 3.3p. – (Copyright The Financial Times Limited 2011)