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.

News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
News
newsRyan Crighton goes in search of the capo dei capi
Extras
indybest

PROMOTED VIDEO
Arts and Entertainment
Actors front row from left, Jared Leto, Jennifer Lawrence, Meryl Streep, Ellen DeGeneres, Bradley Cooper, Peter Nyongío Jr., and, second row, from left, Channing Tatum, Julia Roberts, Kevin Spacey, Brad Pitt, Lupita Nyongío and Angelina Jolie as they pose for a
film
Sport
sport
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Life and Style
news

As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”

Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
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

Network Engineer - CCNP, Hedge Fund, London

£50000 - £60000 per annum: Harrington Starr: Network Engineer - CCNP, Hedge Fu...

Senior Network Engineer-CCIE, Multicast, Low Latency

£60000 - £70000 per annum: Harrington Starr: Senior Network Engineer-CCIE, Mul...

Network Infrastructure Engineer

£30000 - £50000 per annum: Harrington Starr: Network Infrastructure Engineer (...

Network Engineer (CCNP, BGP, Multicast)

£35000 - £45000 per annum: Harrington Starr: Network Engineer (CCNP, BGP, Mult...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition