FTSE continues upbeat start

The London market began the month in positive mood today despite heavy losses for BAE Systems after it emerged that the defence and aerospace giant will get less than expected for its 20% stake in Airbus.

The stock fell 11.75p to 358p, a drop of more than 3%, after investment bank NM Rothschild valued the holding at £1.9bn (€2.74bn) – well below the £3bn (€4.32bn) to £4bn (€5.77bn) hoped for in the City.

But the gloom did not spread to the rest of the market as the FTSE 100 Index moved 33 points higher to 5866.4 by lunchtime.

It was buoyed by bid speculation surrounding supermarket chain Morrisons which over the weekend was said to be a £6bn (€8.65bn) target for a consortium made up of private equity firms Texas Pacific, CVC and Permira. The rumours sent Morrisons shares up 2% or 4.5p to 199p today.

Brewer SAB Miller was also on the move – up 13.5p to 988p – after it agreed to buy US drink brands Sparks and Steel Reserve from McKenzie River for US$215m (€168.24m).

Fellow drinks firm Diageo put on 12.5p to 922p while other risers included catering company Compass, which lifted 11.25p to 273.5p, and ICI, up 11.5p to 374.5p.

And oil giant BP gained 7.5p to 638p after its trading update was in line with expectations in the City. Lower production levels were offset by the higher price of crude oil.

BAE Systems was joined on the way south by oil explorer Cairn after shares fell 2% in the wake of a trading update.

Even though the statement contained few surprises, investors took the opportunity to take profits following a strong run for the stock. Shares were 51p lower at 2142p.

Elsewhere, Matalan shares surged 3% or 5p to 174p as speculation mounted over when founder John Hargreaves would table a bid to take the company private.

Mr Hargreaves, who founded the discount clothing retailer more than 20 years ago, was said to be prepared to offer as much as 220p a share, valuing the company at £900m (€1.3bn), although analysts suggested any bid was more likely to be between 170p and 190p.

But Floors 2 Go dived 8% or 1.75p to 20.5p after the flooring company posted a profits warning amid falling sales.

Like-for-like sales were down 8.6% in the first half of the year which prompted Floors 2 Go to warn the market that profits would be “very marginally below current expectations”.