Investors remain cautious but increasingly hope Fed will not end stimulus this year
US telecoms group AT&T has been the City's favourite to bid for Vodafone for a while now - ever since the UK group announced the sale of its stake in its US joint venture Verizon Wireless.
But now traders are hearing talk AT&T may have its eyes on another UK target. Cable & Wireless Communications closed up 1.77p or nearly 4% at 49p on speculation it could be in the sights of a number of bidders, AT&T among them. The company has been selling off unwanted parts of its disparate portfolio of assets to concentrate on its Caribbean and Central American businesses, and has raised some $1.4bn from disposals.
Overall, after four days of decline, the FTSE 100 started the week on a positive note, up 82.24 points at 6522.20. There is nervousness the US Federal Reserve will begin switching off the money taps at this week's meeting, given the continuing positive economic data and the recent agreement over the US budget. But investors are increasingly willing to bet the Fed will put off any move until next year. With some US merger activity lifting Wall Street, European shares shook off early lethargy to move sharply higher despite poor Chinese figures and a mixed picture in Europe. Michael Hewson, chief market analyst at CMC Markets, said:
A much more positive start to the week in Europe today, after the declines of the past two weeks, despite some disappointing Chinese manufacturing PMI's and a worrying continued deterioration in French economic data that points to a return to recession for Europe's second biggest economy.
The main focus this week remains on Wednesday's Fed rate decision which is expected to see the Fed keep policy unchanged despite a continued improvement in US economic data as shown by a much better than expected print from November industrial production. A rise of 1.1% points to a continued improvement in the US economy, but concerns about low inflation, it is suggested could well stay the Fed's hand, along with concerns about low liquidity as we head into the Christmas break.
Mining groups regained some ground, with Vedanta Resources rising 22p to 797p and Anglo American 24p better at 1293.5p.
Temporary power supplier Aggreko - which was under pressure on Friday - jumped 129p to £16.45 after saying it expected its 2013 performance to be slightly ahead of expectations.
But RSA Insurance lost 2.4p to 90.10p, the biggest faller in the leading index. Since its profit warning on Friday - the third in a row - and the subsequent departure of its chief executive, investors have started to worry about the insurer's credit rating. The insurer - which has been hit by severe problems at its Irish business - is expected to hold meetings to try and avoid a downgrade from A which could put further pressure on the business. Meanwhile analysts have been unveiling their own downgrades, with Canaccord Genuity cutting its target price from 100p to 85p with a sell rating.
Also heading lower was Aberdeen Asset Management, down 3p at 453.1p following a report that the market was worried about its purchase of Scottish Widows and the uncertainty of integrating the business.
Among the mid-caps, UBM dropped 25p to 650p after the media and exhibitions group issued a disappointing outlook for next year.
In a trading update, the group said 2013 revenues were likely to be in line with expectations at around £800m. But in 2014 it warned that margins in its events business would fall to 30%, below forecasts, and also pointed to adverse exchange rate effects given that 85% of its revenues are generated in currencies other than the strengthening pound.
But Synergy Healthcare, a healthcare support services specialist, climbed 77p to £11.10 following news of six contract wins in the US. Canaccord Genuity said:
Synergy has announced a number of contracts in the US totalling the addition of £230m to the order book, which now stands at £1.1bn. The 6 contracts announced (two hospital sterilisation contracts, two reusuable surgical solutions contracts and two applied sterilisation contracts) spread across the whole of the Synergy offering in the US. We expect the majority of the increase to the order book to come from a 15-year HSS service contract to service 20 hospitals and ambulatory care centres. Given the increased visibility of revenues, we increase our target price to 979p [from 891p] and raise our recommendation to hold from sell.
But Analysts at Jefferies said:
In our view, the share price reaction today seems exaggerated with continued pressure in the Dutch linen business and prospects of subdued growth on a group level also in 2015.
Cable & Wireless Communications
Vedanta Resources
Anglo American
Aggreko
RSA Insurance
Aberdeen Asset Management
UBM
Nick Fletcher
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