Market Report: Rescue deal progress is reassuring for insurers

 

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As the blue-chip index enjoyed a modest climb, the insurance groups were on the rise after analysts attacked the sector's recent sell-off as overdone.

Legal & General and Aviva were lifted 5.85p to 97.45p and 17.7p to 295p respectively as the insurers were given a boost by further developments towards a eurozone rescue deal and bullish comments from Nomura.

The Japanese broker calculated that, despite their share prices in the third quarter dropping on average more than 25 per cent, the European insurance companies would benefit from a rise in their net-asset value over the period.

This, said the scribblers, was due to a fall in bond yields from countries not in the GIIPS group (made up of Greece, Ireland, Italy, Portugal and Spain) cancelling out the negative effects of lower equity markets and exposure to those at the centre of the sovereign debt crisis.

Aviva, meanwhile, was also supported by Investec's Kevin Ryan, who reiterated his "buy" rating on the company and called its slide "unjustified".

Overall, it proved another volatile session for the FTSE 100. Despite falling below 5,000 points in the first few minutes of trading, it managed to climb modestly for the second day in a row, creeping up 22.56 points to 5,089.37.

With more details emerging over a potential rescue plan for the eurozone, Barclays jumped up 10p to 156p as talk continued to suggest a strengthening of European banks could be part of the deal.

The miners continued to be badly knocked with Fresnillo the worst hit, retreating 112p to 1,524p as silver extended its recent dramatic slide. Randgold Resources shifted down 180p to 6,170p in response to gold also losing its value, while in the wider sector Kazakhmys' dive of 32p to 782p means it has shed more than a fifth of its share price in just four sessions.

ITV climbed 1.8p to 59.55p after being buoyed by Credit Suisse claiming its survey of media buyers showed advertising in Northern Europe had proved remarkably resilient.

Less keen was Investec's Steve Liechti, who cut his earnings expectations for the X Factor broadcaster. Saying he believed that advertising spending over the fourth quarter would "be worse than current market consensus and media agency forecasts", the analyst recommended investors take profits if ITV's share price continued to hold up well amid the recent economic fears.

Yet more break-up talk helped Smiths Group to rise 10p to 922p as Investec initiated coverage on the technology company with a "buy" recommendation. The broker's analysts said they expected the group to "look very different in three years' time", claiming there was "upside for shareholders as the portfolio is reshaped".

Reports over the weekend that BAE Systems is about to reveal as many as 3,000 redundancies in the UK saw the defence giant slip back 2.2p to 271.6p. Claims that the group – which said it will announce the results of a review of its operations today – was making the move over fears of a slowdown in production failed to stop its mid-tier rival Meggitt advancing 2p to 318.8p, however, as vague chitter-chatter it could become a bid target continued to spread.

Reheated takeover talk on Morgan Crucible was also doing the rounds, although speculation – played down by traders – that the engineer could receive an approach from ArcelorMittal worth between 400p and 450p a pop failed to stop it creeping back 1.4p to 230p on the FTSE 250.

Ocado dipped 3p to 91p as Tesco kicked off its £500m cost-cutting campaign. The online grocer has been hit badly by the plans, with its latest slide meaning it has dropped nearly 32 per cent in a run of six straight sessions in the red.

Meanwhile, the top-tier supermarket was given a helping hand by Warren Buffett after it was revealed that the veteran US investor had raised his stake by 34 million shares to 3.6 per cent. The group ticked up 6.2p to 371.4p, while Sainsbury was 4.6p stronger at 270.9p.

The news that its founder is planning on setting up a rival initially prompted easyJet to drop as low as 345.9p. The budget airline announced Sir Stelios Haji-Ioannou had informed it of his plans to start "Fastjet" and warned it would "take necessary action to protect [its] rights", though by the bell it had recovered to close 1p better off at 353p.

The small-cap diagnostics group Axis-Shield slipped back 50p to 405p after its rival Alere refused to increase its offer above 460p a share. As well as cutting the threshold for acceptances to 50 per cent, 40 per cent below the original level, the US predator also cautioned that it could make "alternative acquisitions" instead.

Elsewhere, persistent chatter that Sportingbet is close to agreeing a takeover by Ladbrokes (down 1.6p to 121.5p) helped the online gaming company to advance 0.75p to 50.5p.

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