Market Report: Greece hopes help Aviva up as bid talk re-emerges
Friday 22 July 2011
Vague bid mutterings around Aviva made a return last night as the insurer shot up the blue-chip index thanks to European leaders agreeing a deal on a bailout of Greece.
The group has been the subject of takeover chatter before, and yesterday the rumours were reheated as speculation spread that at least two of its European peers could be mulling over a possible approach worth 575p a share. Zurich and Allianz were among the names being discussed as potential aggressors, with market gossips saying the former could be tempted to try and acquire a UK company given the strong value of the Swiss franc.
However, there was widespread disbelief around the tale, with Panmure Gordon's Barrie Cornes saying its likelihood was "extremely low". The analyst added that there was little chance of corporate activity among the insurers at the moment given the number of issues currently involving the sector, including the controversial proposed Solvency II capital rules.
Instead, the company's advance of 16.9p to 420p was put down to rising optimism over the outcome of the emergency summit in Brussels on Europe's debt crisis. Aviva was also helped by Goldman Sachs, which said it could be the major beneficiary if MPs are successful in their attempts to persuade the Financial Services Authority to push back the implementation of upcoming regulatory changes.
The positive noises emerging from Brussels meant the financial stocks dominated the FTSE 100's leaderboard, helping the top-tier index to recover from an early fall and close 46.07 points higher at 5,899.89. Among Aviva's peers, Legal & General was bumped up 2.8p to 117.2p while Old Mutual charged forwards 3p to 131.4p.
The banks were also ahead, with the gold medal position taken by Barclays after a climb of 17.25p to 239.85p, and Lloyds Banking Group – up 2.65p to 47.56p – and Royal Bank of Scotland – up 1.94p to 36.05p – were not far behind.
AstraZeneca ticked up 59.5p to 3,092p after the drugs group received approval from the US Food and Drug Administration (FDA) late on Wednesday for its Brilinta heart product. Matrix's Navid Malik called it "positive news," saying the drug "is the only near-term product with reasonable sales to help to offset some of the upcoming generic exposure it faces," although he did warn that the FDA's ruling about what must be on the label "makes it less competitive".
There was a rise of 15p to 1,261p for Diageo in the wake of figures from one of the Guinness owner's rivals, Remy Cointreau.
The French drinks group, whose brands include Cointreau and Remy Martin, announced its like-for-like first-quarter sales had jumped more than 30 per cent, with demand in Asia proving particularly strong.
Less strong on news from across the Channel, however, was WPP which crept forwards just 1.5p to 722.5p. Although the advertising group's peer Publicis revealed higher revenue growth for the first half of the year than expected, the French company also saw its margins hit by an increase in operating costs.
There were a number of companies releasing updates yesterday, including Kingfisher, with the B&Q owner announcing figures for the second quarter. The group increased by 14.2p to 267.4p as the performance of its French operations impressed investors, although overall its like-for-like sales eased back half a per cent.
The retailer blamed trading conditions in the UK partly on the rather poor recent weather, and there was a similar theme to Britvic's interim management statement. The soft drinks company revealed its volumes over the last four weeks had dropped more than 8 per cent, citing the fact that June was the coldest month since 2001, as it slumped 4.1p to 363p on the FTSE 250. Elsewhere on the mid-tier index, Meggitt surged forwards 9p to 386.3p after the engineer announced it had delivered a £7m contract to provide BAE Systems – up 1.8p to 304p – with fuel bladders. With talk this week it could end up a blue-chip company after the next reshuffle, Guardian Stockbrokers' Atif Latif said the news "reinforces [its] growth story, which shows resilience in a tough defence market where budgets are being cut".
Meanwhile, Thomas Cook failed to see any joy from the Competition Commission's decision to give a provisional green light to the merger between its and the Co-op's high street travel businesses. The tour operator edged down 0.45p to 68p, as Peel Hunt's Nick Batram warned that the deal was "not the whole solution [to its UK issues] and could equally be another distraction".
On plus markets, Teknomining rose 57.5p to 165p – a jump of over 50 per cent – after the mining explorer released drilling results that, it said, demonstrated the "huge potential" of its licence areas in Turkey.
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