Rescue potential for Northern Rock drives up FTSE

Troubled mortgage bank Northern Rock led blue-chip stocks higher today on the back of mounting speculation over a potential rescue for the lender.

Troubled mortgage bank Northern Rock led blue-chip stocks higher today on the back of mounting speculation over a potential rescue for the lender.

Reports that private equity firm JC Flowers had raised £15bn towards a takeover of the company saw shares surge by 12% – a gain of 16.2p to 151.8p - despite analysts cautioning over the prospects for a high-risk deal.

With the financial sector on the front foot, the FTSE 100 Index closed up 34.8 points to 6535.2, as it shrugged off a downbeat opening from the Dow Jones Industrial Average in the United States.

Financial stocks featured heavily on the risers’ board, with Alliance & Leicester up 58p to 880p and insurer Old Mutual ahead 7.6p to 168p, with both stocks gaining on news of share buybacks.

Royal Bank of Scotland was 15.5p higher at 554p on reports that the firm may sell its hotel properties, while Halifax Bank of Scotland’s plans to concentrate on more profitable areas such as corporate lending outlined yesterday helped the bank climb 30p to 980p.

Other heavily-weighted banks lending support to the benchmark index included HSBC, up 24p at 935.5p, and Barclays, which gained 19p to 640p.

British Airways was flying 4% higher after it revealed a strong uplift in premium traffic during September. The airline saw first and business class passengers rise by 6.6% in the month, although total passenger numbers declined by 0.8% compared to last year. The stock lifted 15.75p to 424.75p.

Mobile phone giant Vodafone topped the Footsie fallers with a drop of 4.4p to 171.1p on reports that new regulations were hindering revenues growth at its New Zealand business.

Argos and Homebase owner Home Retail Group slipped more than 2%, or 9.25p, to 398.25p, after a downgrade from brokers at Dresdner Kleinwort.

Other retailers on the back foot included B&Q owner Kingfisher, a strong gainer yesterday after a wider upgrade for the retail sector. The stock was down 2.1p to 194p, as the company turned ex-dividend, meaning that shareholders are not entitled to the latest payout.

Oil major BP was also in retreat, down 2.5p to 557p on market rumours about potential downgrades to third-quarter profits expectations.

Elsewhere in the energy sector, Royal Dutch Shell lost 14p to 1954p and British Energy was off 7p at 535p after the price of light, sweet crude for November delivery remained below recent highs.

In the second tier, ceramics and electronics group Cookson lifted more than 4% as investors cheered yesterday’s news of a £495 million takeover approach for filters and coatings specialist Foseco. The stock slipped back from stronger gains earlier in the session but still stood 35.5p up at 830p.

The biggest Footsie risers were Northern Rock up 16.2p at 151.8p, Alliance & Leicester ahead 58p at 880p, Old Mutual up 7.6p at 168p and Taylor Wimpey ahead 12p at 300.75p.

The biggest Footsie fallers were Vodafone off 4.4p at 171.1p, Home Retail Group down 9.25p at 398.25p, Royal & Sun Alliance off 2.7p at 153.1p and Cable & Wireless down 3.1p at 185.2p.

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