FTSE recovery continues

The London market continued its recent recovery today, despite a disappointing session for shares in aerospace and defence group BAE Systems.

While BAE fell 3% on disappointment at the price tag for its stake in planemaker Airbus, the rest of the market was in a brighter mood as investors built on the gains seen at the end of last week.

The FTSE 100 Index closed 51 points higher at 5884.4 – meaning it has now added 200 points in the past week, helped by hopes that the United States may be close to ending its run of interest rate rises.

Among the strongest risers, supermarkets group Morrisons jumped 4% after it was said to be a £6bn (€8.64bn) target for a consortium made up of private equity firms Texas Pacific, CVC and Permira. The rumours left its shares up 7.25p at 201.75p, although still some way short of the high point for the year.

Morrisons was beaten to the top of the risers board by Northern Rock, which outstripped the rest of the banking sector with a gain of 40.5p to 1040.5p.

Catering group Compass also rose 9p to 271.25p, helped by signs in the City that the company’s recovery could be making progress.

Shares in BAE Systems fell 12p to 357.75p, a drop of more than 3% after investment bank NM Rothschild valued the company’s 20% Airbus holding at £1.9bn (€2.75bn) – well below the £3bn (€4.3bn) to £4bn (€5.7bn) hoped for in the City.

BAE 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 40p lower at 2153p.

Oil giant BP fared better – up 7.5p to 638p – after its second quarter trading update was in line with expectations in the City. Lower production levels were offset by the higher price of crude oil.

Outside the top flight, Matalan shares surged 4% or 6p to 175p 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).

Construction group Kier also jumped 9% – a gain of 129p to 1636p – after it forecast bigger profits than last year.

But Floors 2 Go dived 9% or 2p to 20.25p 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”.

The biggest Footsie risers were Northern Rock up 40.5p at 1040.5p, Morrison’s ahead 7.25p at 201.75p, Compass up 9p at 271.25p and ICI ahead 11.5p at 374.5p.

The biggest fallers were BAE Systems down 12p at 357.75p, Cairn Energy off 40p at 2153p, BSkyB down 7.5p at 566p and Pearson off 7.5p at 729p.