Market Report: HKEx latest to be linked in LSE bid speculation

With bid speculation swirling around the London Stock Exchange (LSE) since its planned merger with TMX fell apart in June, last night the bourse was pushed up the mid-tier index as vague rumours spread that it could receive an approach from its Hong Kong peer.

The LSE pulled out of its agreed tie-up with the Canadian group last month after failing to convince enough TMX shareholders to back the deal and the move sparked chatter it could become a target itself, with some claiming its United States rival, Nasdaq, may make a third attempt for it.

Earlier in the week, talk emerged claiming the Stock Exchange of Singapore (SGX) might be interested and yesterday the chitter-chatter was that Hong Kong Exchanges and Clearing (HKEx) could make a move as well. According to the vague tale, played down by traders, China may be willing to back such a move in order to thwart SGX and with market gossips saying HKEx could offer more than 1,500p a share, LSE jumped up 33p to 996.5p.

HKEx stated in February that it would "consider international opportunities for alliances, partnerships and other relationships", and Charles Stanley's Andrew Mitchell said a "combination of an Asian exchange with a leading Western exchange such as the LSE would potentially be a plausible combination". However, the analyst added that the fact the London bourse is "lacking in terms of derivative exposure" was a downside to any potential buyer.

After plummeting over 90 points on Monday, the FTSE 100 bounced back 37.18 points to 5,789.99 amid optimism the US will end up lifting its debt ceiling. The banks were some of the worst hit by the sell-off earlier in the week, so Lloyds Banking Group led the rebound, advancing 1.8p to 43.14p.

The group revealed it had managed to tempt away Nathan Bostock – one of the big names at Royal Bank of Scotland, 0.12p ahead at 33.1p – to be its new head of wholesale banking, in what Shore Capital's Gary Greenwood described as "a good appointment for Lloyds but a disappointing loss for RBS".

With investors rediscovering their appetite for risk, the defensive stocks were left behind, including British American Tobacco and Imperial Tobacco. They dipped 30p to 2,745p and 8p to 2,140p respectively, despite Moody's saying the outlook for the industry was stable even though mature markets were seeing a fall in volumes.

As MPs questioned Rupert and James Murdoch and Rebekah Brooks over the phone-hacking scandal, BSkyB continued its recent rise, climbing 20.5p to 734p. The broadcaster has now pulled back more than 5 per cent since News Corp withdrew its bid, having dropped nearly 20 per cent previously.

JP Morgan Cazenove took the opportunity to restart its coverage with an "overweight" rating, saying it expected the group's full-year results next week to show continuing "solid growth" while adding that the company could end up paying a special dividend of 120p.

BAE Systems continued to be the subject of vague bid chatter, with the defence giant having been recently discussed as a possible target for Boeing. The group touched a peak of 301.7p during trading, although by the bell it was at 298.6p, a shift up of 1.7p.

Despite sector bellwether IBM increasing its full-year expectations late on Monday, not all the technology stocks managed to power up as result. Among those that may have benefited on the read-across was Micro Focus, but although Panmure Gordon's George O'Connor said the US giant's results "bode well" for the software company, it was still pegged back 3.1p to 296.3p.

Meanwhile, Autonomy dropped 27p to 1,703p, while Kofax only ticked up 0.3p to 487.4p, even as Espirito Santo reiterated its "buy" ratings for both companies in the wake of IBM's figures.

Bwin.party closed in the gold medal position on the FTSE 250, shooting up 7.8p to 140.1p, on hopes Germany may have to dampen down its proposed strict new gambling regulations. The European Commission said the country needs to consider other factors, including a ruling last year by the European Court of Justice, and it meant Betfair was also in the blue as it moved 16.5p to 632p.

Its shares may not have been quite selling like hot cakes, but Greggs was still driven up 3.5p to 534.5p. The high street chain of bakers rose after taking the advice of Lord Sugar and promoting Helen Milligan, the runner-up on The Apprentice television programme to become its new head of retail for the South-east.

Down on the Alternative Investment Market, Capital Pub Company frothed up 23p to 233.5p after agreeing to be bought by Greene King for 235p a share. Having beaten off competition from Fuller, Smith & Turner – up 7.75p to 709p – the mid-tier index group eased forwards 1.4p to 481.6p, while elsewhere in the sector Marston's was pushed forwards 1.6p to 102p by Numis Securities' decision to change its advice to "buy" from "add".

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