Market Report: BA flies on rival's profits and class action news

There was a double dose of good news for British Airways yesterday, which was soaring on the blue-chip index thanks to a positive read-across from across the Channel and an important legal victory.

The company advanced 11.5p to 272.9p following the release of latest figures from Europe's largest airline, Air France-KLM. The carrier, which was created in 2004 following a merger between the French and Dutch airlines, posted net earnings in the second-quarter of €260m, after losing €147m in the same period a year earlier.

With an increase in passenger traffic last month of 3.1 per cent, analysts welcomed the results and Air France-KLM enjoyed a large rise in its share price during trading yesterday on the Paris market.

There was another reason to celebrate for BA, which in October posted its first profit for two years. The airline won an appeal that prevents its cargo customers from banding together for a lawsuit over its involvement in fixing cargo prices. Earlier in the month BA was one of 11 airlines fined by the European Commission for taking part in the cartel.

Overall, the FTSE 100 finished 76.15 points up on 5,768.71, with investors cheerful as it looked more likely that Ireland would accept a bailout. Rising commodity prices helped the miners move up, and Fresnillo and Kazakhmys ended the day near the top of the leaderboard, up 68p to 1,414p and 44p to 1,470p respectively.

Another member of the sector to gain was Xstrata, as reports that Glencore – which holds a 34.4 per cent stake in the miner – was thinking about an initial public offering revived speculation over a merger. There were rumours earlier this year that it was a possibility, but Xstrata investors spoke of their reluctance because of difficulties valuing the commodities company.

"There has been speculation that Glencore might look to proceed down the listing route in part to give a sort of independent external price, and almost at the last minute of that process, go down the route of merging with Xstrata rather than listing." said Panmure Gordon's Alison Turner. "Or, indeed, take it through to IPO, after which they could pursue a merger in a situation where both companies now had an independent market value as a basis to start a discussion." The miner jumped 26.5p to 1,338.5p.

BG Group was also the subject of market chatter, as gossips revisited an old favourite. After speculation last month that China National Offshore Oil Corporation was looking at making a £14-a-share bid for the gas explorer, the talk was that it was sniffing around the British energy giant again.

The company received a boost from H2O Markets reiterating its "buy" recommendation, with Daniel Harris, head of dealing at the broker, saying it "is ideally positioned to take advantage of shifting global markets, and is in a strategically superior position to most of its market peers". Amid the gossip and positive sentiments, BG Group did manage to reach 1,246p, but by the end of the session it had dropped back to 1,232p, an increase of 13p.

There was some solid acquisition news elsewhere, as Weir Group announced that it had bought American Hydro Corporation, which produces hydro-electric power station turbines. The deal means that the Glasgow-based pump and valve maker can move into renewable energy, and investors responded positively, pushing it up 36p to 1,725p.

On the FTSE 250, QinetiQ's strong first-half results and its statement that dividends could be reintroduced at the end of the year led to a huge share price rise of more than 13 per cent, but not everyone was convinced. Analysts from Investec said that the fact that the defence firm's numbers beat expectations was "due to Global Products, up 65% y-o-y, where the Q-NET product to the US Army has sold particularly well."

The broker warned that current orders may not be repeated in future, noting that both "the UK and US Services businesses are under revenue and margin pressure." Still, the market did not listen to its "sell" advice, and QinetiQ moved up 13.5p to 112.5p.

Also going strong was PartyGaming, as it revealed that its planned merger with the Austrian company bwin had been approved by the federal cartel office in Germany. The companies are expected to combine in the first quarter of next year, and Gibraltar-based PartyGaming climbed 12.2p to 232.2p.

At the opposite end, Lamprell plummeted 47p to 295p while Keller Group, which said its results for the year would be "around the bottom end of the current range of market expectations", fell 49p to 546p.

There was a new face on the Alternative Investment Market yesterday, as Zanaga Iron Ore listed, raising £62.1m as a result. The exploration company, which operates in the Republic of Congo and has an investment deal with Xstrata, placed 39.8m shares at 156p a pop, and by the end of the session it had risen 7p to 163p.

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