Kraft’s Cadbury bid sparks a flurry of FTSEmerger hopes
THE leading share index notched back up towards the 5,000-points mark yesterday, after a proposed bid for Cadbury by Kraft raised hopes of a more general pick-up in merger activity and lifted banks and commodity shares.
The FTSE 100 rose 1.7 per cent to a close of 4,933.18, up 81.48 points, as it came close to beating its high for the year, while registering its biggest percentage gain in more than two weeks.
Cadbury soared 38 per cent to its highest closing level since June 2007, after US giant Kraft Foods announced a $16.7bn (£10.2bn) bid which was rejected by the world’s second-largest confectionery group.
“What’s really significant about this (bid for Cadbury) is that it is another statement of confidence that managers of companies have in the prospects for their operating environment given that the recovery is now underway in the global economy,” said Mike Lenhoff, chief strategist at Brewin Dolphin.
“My guess is that we are going to see more of this. This is exactly the kind of thing you tend to see during recovery phases of the cycle,” he said.
Meanwhile Associated British Foods gained 4.1 per cent after the firm increased its full-year earnings forecast on the back of strong results from its Primark discount clothing retailer chain.
Unilever also gained, adding 2.2 per cent.
Banks were higher as investors turned to riskier assets. Lloyds Banking Group gained 4.5 per cent after it was suggested the lender was looking to convert £6.79bn worth of preference shares into common equity in a further bid to shore up its finances.
Barclays, Royal Bank of Scotland, Standard Chartered and HSBC were between 0.6 and 2.2 per cent higher.
Miners found strength from rising metals prices.
Lonmin, after reports of a renewed takeover target for Xstrata, rose 5.9 per cent, with the latter up 2.5 per cent higher.
Vedanta Resources, Antofagasta, Rio Tinto and Kazakhmys climbed between 2 to 3.1 per cent.
The oil price was in focus ahead of Wednesday’s OPEC meeting which is expected to maintain current output levels.
Royal Dutch Shell, BG Group, BP, Tullow Oil and Cairn Energy added between 0.6 and 3.2 per cent.
Among other gainers, British Airways rose 1.8 per cent after hopes were raised it was considering a bid for Lufthansa’s Midlands-based group BMI.