Carphone Warehouse lifts FTSE

Carphone Warehouse shares surged today after the company announced a deal to buy the UK arm of internet provider AOL for £370 million.

The FTSE 250 Index stock had been in negative territory but leapt to stand 4% higher after Carphone won the AOL auction held by Time Warner.

The performance of Carphone was the highlight of an otherwise disappointing session for the London market, as the FTSE 100 Index lost hold of some of its recent gains by easing 20.3 points to 6052.4 by mid-morning.

The blue-chip fallers board included Sainsbury’s, down 4.25p to 386.75p as investors took profits despite another sales rise from the supermarket chain.

Corus was another stock on the way down, losing a further slice of the takeover premium achieved recently amid speculation of a bid from India’s Tata. Shares were off 14.75p at 464.25p.

Most of the trading interest was in the FTSE 250 Index after the news from Carphone Warehouse and trading updates from a number of other companies.

Fashion house Burberry rose 20.75p to 531p after investors were told of “extraordinary” demand for the retailer’s new range of luxury handbags.

And strong online sales boosted first half profits at N Brown, causing its shares to rise sharply for a time. The stock later eased to stand 2p higher at 254p.

There was also a gain of 5.25p to 222p for First Choice Holidays as speculation of a bid from Kuoni lifted shares for a second successive day.

For Carphone, shares were initially lower after it said start-up costs from launching free broadband would be £20 million higher than expected.

But the stock was later 15p higher at 348.5p, reflecting the City’s approval of a deal that gives Carphone more than two million broadband customers.