FTSE recovers

Signs of a revival in major deal activity encouraged investors today after a difficult few sessions for world markets.

Signs of a revival in major deal activity encouraged investors today after a difficult few sessions for world markets.

A takeover approach worth £2.9bn (€3.4bn) for industrial giant Tomkins and talks over a potential merger involving International Power and the overseas assets of France’s GDF Suez gave a boost to confidence.

The developments meant the FTSE 100 Index shrugged off an earlier weak start triggered by fresh falls for UK banks and the beleaguered oil giant BP.

Having dropped as low as 5111 early on, the top flight later stood 31.7 points higher at 5190.4.

This reflected hopes for a better session in New York after the Dow Jones Industrial Average dropped by 2.5% on Friday due to disappointment over the second quarter results posted by two of the country’s big banks.

Bank of America Merrill Lynch and Citigroup revealed that investment banking revenues dropped in the quarter, fuelling concerns about the performance of Barclays and other major banks with similar activities.

The results of European bank stress tests due to be announced at the end of this week also added to nerves, although Barclays later recovered to stand 3.1p higher at 287.75p and HSBC rose 8.6p to 630.2p.

Lloyds also bounced back from a weak start to stand 0.8p higher at 60.4p, while Royal Bank of Scotland added 0.5p to 44.3p.

This was after the body charged with managing the taxpayer-owned banking assets said it had hired leading investment banker Jim O’Neil to oversee the sale of stakes in Lloyds and Royal Bank of Scotland.

BP shares were down 5% at one stage after the discovery of seepage and possible methane gas near the site of its damaged well, which was capped for the first time since April on Thursday. The stock later recovered to stand 2% or 7.6p lower at 399.6p.

The biggest rise in the top flight came from International Power after it emerged that it had reopened talks over a potential combination with GDF Suez of France. Shares jumped 30.3p to 347.1p, a rise of more than 9%.

The other major deal news involved industrial firm Tomkins, which jumped 32% after it said it had received an approach worth 325p-per-share from a consortium comprising US private equity firm Onex Corporation and the Canada Pension Plan Investment Board. The UK firm – a former member of the FTSE 100 – said the due diligence process was at an advanced stage as shares rose 73.5p to 303.8p.

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