Sainsburys takeover rumours boost FTSE

Speculation about a takeover battle for Sainsbury’s helped keep top flight shares above the key 4500 support level today.

After racking up losses in early trading, the FTSE 100 Index recovered to finish the day 16.6 points ahead at 4518.6.

Ailing supermarket chain Sainsbury’s was easily the biggest blue-chip riser of the session after gaining 13p to 271p on the back of renewed takeover speculation.

Potential bidders mooted in the City included US-based group Target, although retail tycoon Philip Green distanced himself from the bid talk today.

Rival supermarket chain Morrison’s was also doing well after a positive broker note, rising to third in the Footsie with a 2% or 4.25p gain to 185.75p.

Oil stocks were the other major factor in the Footsie’s rise as the cost of crude rose to just under $45 (€36.20) a barrel in New York by the close of trading in London. As a result, Shell rose 5.25p to 415.25p and BP lifted 2.25p to 505.75p.

Financial stocks were also brighter with Royal & Sun Alliance ahead 1.25p at 72.75p, Royal Bank of Scotland 18p higher at 1589p and Lloyds TSB 3p stronger at 427p.

Wal-Mart Stores and Federated Department Stores cast a shadow over Wall Street with news that their August sales gain was the smallest in 17 months.

US weekly jobless numbers also crept higher, with more Americans filing first-time unemployment claims last week than any time since mid-April.

However, traders expecting the worst after Tuesday’s lower than expected consumer confidence figures remained positive, sending the Dow Jones Industrial Average up five points to 10174.

On a busy day for corporate news in London, leisure groups Diageo and Whitbread led the list of Footsie fallers after issuing updates.

Diageo was the second heaviest faller, slipping 8p to 675.5p after it said the introduction of a smoking ban in Ireland and a tax on alcopops in Germany had weakened demand for many of its key brands, which include Guinness and Smirnoff vodka.

Rival Allied Domecq was unchanged at 448p and brewer Scottish & Newcastle slipped 2.5p to 397.75p. Among FTSE 250 Index stocks, Mitchells & Butlers fell 8.25p to 247.25p and Wolverhampton & Dudley Breweries eased 20.5p to 829.5p.

Whitbread was down 37.5p at 779p after revealing a sales slowdown over the past 11 weeks in all areas of its business except its Travel Inn budget hotels.

Elsewhere, clothing retailer Matalan advanced 2p to 210p after saying it had made encouraging sales progress in the first half.

But shares in Avis Europe hit a new low after falling 16% or 13.25p to 68.75p in the wake of a continued gloomy outlook for its car rental operations.

Tough trading conditions led half-year profits 64% lower and Avis said it was not expecting the situation in 2005 to be much better.

The day’s biggest risers were Sainsbury, up 13p to 271p, Capita Group ahead 9.75p to 324.25p, Morrison lifting 4.25p to 185.75p and Schroders NV rising 12.5p to 592p.

Biggest fallers included Whitbread, down 37.5p to 779p, Diageo off 8p to 675.5p, William Hill losing 5p to 533p and Johnson Matthey slipping 6.5p to 914.5p.