Footsie falls just short of 5900 mark

The London market again tested highs not seen for nearly five years today as the FTSE 100 Index spent much of the day above the 5900 mark.

Bid activity and speculation on both sides of the Atlantic drove the Footsie above 5900 before it settled back to close the session up 39.1 points at 5897.8 - its highest level since the end of the dotcom boom.

Investors latched on to the 67 billion US dollars tie-up of BellSouth and AT&T in the United States to look at potential consolidation in the UK.

Attention was focused on BT following reports that acquisitive Australian bank Macquarie could join forces with private equity groups to bid.

BT topped the blue chip risers board with gains of more than 5% or 11.25p to 231.75p as investors continued to be encouraged by the speculation, although the group’s highly unionised staff and its £4.7bn pension fund deficit are thought to have deterred any bids so far.

Record profits from banking giant HSBC and upbeat comments from analysts about the possible sale of Vodafone’s struggling Japanese unit also added to the glow around UK stocks.

Shares in Vodafone gained 3% or 3.5p to 125p after chief executive Arun Sarin signalled the prospect of a potential £5 billion pay-day for shareholders.

Mr Sarin indicated that the successful sale of the firm’s Japanese subsidiary would prompt directors to consider the best way of returning cash to shareholders.

Banking stocks added further momentum after HSBC unveiled annual profits of 20.97 billion US dollars (£11.91bn) – the biggest figure recorded by a UK-based bank.

Shares in HSBC rose 14.5p to 989.5p, while HBOS gained 18p to 1007.5p and Royal Bank of Scotland cheered 13p to 1920p.

But gases giant BOC slipped a penny to 1543p even though it shook hands on an £8.2 billion takeover by German industrial giant Linde.

Although Linde has signalled that it is willing to pay 1600p per share, analysts worried that the takeover could become bogged down by competition concerns and that it might put too much of a financial burden on the group.

And miners and oil stocks provided a further drag to the London market, with Kazakhmys and Rio Tinto down 14p to 889p and 22p to 2689p respectively, while Royal Dutch Shell lost 15p to 1825p.

Outside the top flight, speculation that Matalan’s founder John Hargreaves is in talks with venture capitalists over a £900 million buyout meant shares in the discount clothing chain rose 4%, up 7.25p to 198p.

Market research firm Taylor Nelson Sofres advanced 6p to 252p after posting a better-than-expected 21% rise in profits as strong gains in Europe offset troubles in the United States.

The day’s biggest top flight risers were BT up 11.25p to 231.75p, Rexam 18.5 stronger at 532.5p, Vodafone up 3.5p to 125p and Schroders up 32p to 1172p.

The heaviest fallers were Reuters, off 7.5p to 379.5p, Cairn Energy down 35p to 1962p, Kazakhmys down 14p to 889p and Shire 13.5p lower at 903p.