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.

PROMOTED VIDEO
News
Teeth should be brushed twice a day to prevent tooth decay
education
News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
Sport
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
News
Those who were encouraged to walk in a happy manner remembered less negative words
science
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
News
Renee Zellweger as Bridget Jones
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
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

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London