Market Report: Water works for Footsie as deal chat excites

The markets drank deeply from the well of takeover optimism following reports that Northumbrian Water Group was a target. The rumours helped to lift the FTSE 100 index by 58.8 points to 5,247.4.

Shares in the Durham-based utility leapt by 12 per cent amid talk that a Canadian investment group, the Ontario Teachers' Pension Plan, was preparing a £1.7bn bid. Some analysts suggested there could be a feeding frenzy for other water stocks.

UBS said the potential for mergers and acquisitions in the sector "should become an increasing trend and should not be underestimated". Lakis Athanasiou, an analyst at Evolution, added: "If confirmed, this will establish a higher trading range for the other water stocks. The biggest beneficiary would be Severn Trent, followed by United Utilities."

And so it proved, with water quenching investors' thirst all day. On the top tier, Pennon Group was the best performer and rose 25.5p to close at 540p. Severn Trent was not far behind, rising 45p to 1170p. Investors refused to be daunted by a note from Merrill Lynch saying that "such speculative stories appear at least twice a year". Northumbrian Water's shares closed 30.4p higher at 289p.

For once, British Airways had reason to thank Ryanair for a positive read-across. An upbeat statement from the Irish budget carrier, reports that its planned alliance with American Airlines and Iberia was moving ahead, and an upgrade from Goldman Sachs all helped to increase its share price.

Ryanair said it had raised its profit forecast and its fares had not declined by as much as the market expected. As a result, Goldman upped its target price for BA from 253p to 265p, which helped to lift shares in the UK's flagship airline, which has not had an easy few months, by 6.8p to 213p.

A broker note from Royal Bank of Scotland sent Rolls-Royce shares into overdrive. The aerospace engineer rose 7.5p to 487.3p following a note entitled "Success breeds success". Sandy Morris, an RBS analyst, said: "We expect Rolls-Royce to enjoy a good recovery in its civil aerospace after-market business from the second half of 2010, and some recovery in its civil aerospace original equipment revenues from 2011." He increased the target price from 430p to 700p to bring it in line with consensus.

RBS enjoyed a bit of a boost itself. The bank's shares rose by 2.5p to 34.8p after it unveiled a retail-targeted bond on the platform launched by the London Stock Exchange yesterday.

The worst-hit financial stock was Schroders. Credit Suisse cut the asset manager's shares from "outperform" to "neutral" and lowered the target price from 1415p to 1350p, saying "moderating flows will cap any further positive earnings revisions". Credit Suisse said its earnings-per-share downgrades resulted from lower assumptions about net flows and margins as well as higher costs. The shares plunged 35p to 1211p.

BT Group also fell after the shadow Chancellor, George Osborne, said the Tories might allow rivals telecoms operators to connect their fibre-optic networks to BT exchanges to break its monopoly. But the news did not prove a huge blow to traders and BT's stock retreated by 1.1p to 136.5p.

Investec put in a good performance on the second tier after its asset management division announced strong net inflows in the nine months to the end of December. They hit £3.6bn, with £1.5bn coming in the last three months. The chief executive, Hendrik du Toit, was also confident of a strong end to the year. Investec's stock rose by 13.8p to 440.1p, days after the group issued its nine-month update, which led Numis to raise its recommendation from "hold" to "add".

A strong note from Deutsche Bank lifted housebuilders. The top performer was Barratt Developments, which was given a "buy" rating and a target price of 193p. Deutsche rated three other builders as "buys" and three as "holds".

In the wider market, another housebuilder Galliford Try rubber-stamped a deal to build a new library in Worcester and a history centre for Worcestershire County Council, but news of the £60m private finance initiative did not prevent its shares sliding 3p to 314.75p.

The brewer and pubs operator Marston's was among the biggest fallers –dropping 2.1p to 85.8p – after UBS removed it from its "most preferred" list of European leisure shares, following an update on Friday which said sales had risen over Christmas but were knocked back by last month's cold weather.

Shares in Timestrip, which makes "unique label technologies" to show how long a product has been in use, closed 0.15p higher at 1.67p after the company said it had won a contract to make labels for toothbrushes.

It was all go at Catalyst Media, which owns a 20 per cent stake in Satellite Information Services and is producing an online gambling game. The group said it had launched a strategic review that could involve a sale of the company. The shares rose 14p to 83.5p.

SThree's stock survived a pounding despite saying its profits had fallen by two-thirds last year. The recruitment agency said it was optimistic that some of its markets were stabilising, and its shares rose by 7.6p to 312.4p.

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice