FTSE up on GUS takeover rumours

Speculation that Argos owner GUS was on the shopping list of a consortium of private-equity firms and banks boosted the London market today.

GUS shares rocketed 5% or 42p to 930p after it was reported that an £11bn (€16bn) takeover bid was being prepared with a view to the group being broken up.

It helped the FTSE 100 Index to close 7 points higher at 4735.2 and overcome fresh jitters about the weakness of the US dollar and a New Year interest rate hike.

The likelihood that the Bank of England will raise the cost of borrowing to 5% next month increased after retail sales grew at a stronger than expected rate in November.

It also pushed the greenback to a new 12-year low against the pound of $1.9553 until a minor recovery took place during the afternoon.

But the sales data gave a much-needed shot in the arm for retailers whose shares have been shaken recently by anecdotal evidence of weak trading on the high street.

With GUS at the top of Footsie risers board, Boots occupied third spot with a 16p rise to 650.5p and stood ahead of clothing giant Next – up 40p at 1645p.

Building materials group Hanson gained 2% or 10p to 435p on US government comments about a possible resolution of issues relating to asbestos litigation.

But oil group Cairn Energy fell sharply ahead of its drilling report tomorrow, drifting 69p to 1362p.

Steel group Corus was next with a 1.75p loss to 51.75p despite saying it had signed a 10-year deal for its site at Redcar to supply a consortium of overseas companies, securing hundreds of jobs.

The main corporate news came from the second and third flights with Kidde rising 4% or 6.5p to 165.5p after announcing that it had accepted a £1.44bn (€2bn) takeover offer from US engineer United Technologies Corp.

Investors showed renewed confidence to the housebuilding sector amid signs that the collapse in the mortgage market could be avoided.

Barratt Developments led the charge, up 10% or 54p to 608.5p, and was followed by Persimmon with a 59p gain to 700p and Wilson Bowden, which cheered 97p to 1160p.

Adding to the positive assessment of consumer spending was Internet bank Egg, which predicted higher-than-expected profits due to better loan and credit card business. Shares lifted 4% or 4p to 98.5p.

Fellow second rank stock Avis Europe was at the other end of the scale, second in the fallers with a 9% or 4.75p loss to 50.25p after disappointing investors with news that trading was tough and it was not planning to pay a full year dividend.

In the FTSE 350, television set top box maker Pace Micro Technology was also on a downward slope after saying it was anticipating lower than expected full-year profits. Shares slipped 23% or 13.5p to 44.5p.

The highest climbers in the Footsie today were GUS up 42p to 930p, GlaxoSmithKline rising 30p to 1196p, Boots up 16p to 650.5p and Next rising 40p to 1645p.

The heaviest fallers were Cairn Energy down 69p to 1362p, Corus falling 1.75p to 51.75p, Imperial Tobacco down 25p to 1378p and Morrisons falling 3.75p to 211p.