Monday, September 7, 2009

Cadbury bid boosts sentiment, lifts FTSE

Britain's top share index added 1.4 percent by mid-session on Monday, as a bid for Cadbury by Kraft boosted investor sentiment which helped banks and commodity shares gain strongly.

By 1046 GMT the FTSE 100 was up 69.74 points at 4,921.44 following a 1.2 percent gain on Friday, its biggest percentage gain in two weeks as it snapped a three-session losing streak.

Cadbury surged over 40 percent after Kraft Foods, North America's biggest food group, announced a $16.7 billion bid, which was rejected by Cadbury, the world's second-largest confectionary group.

Cadbury shares received a further boost as investors speculated on a possible counterbid by the world's biggest food group Nestle AG, though the Swiss group declined to comment.

''From a market sentiment point of view, takeovers are exactly what are needed to keep the rally going after a fairly sluggish week,'' said Ian Horsley, indexes trader at Spreadex.

The news put wind in the sail of other food producers with Unilever up 2.9 percent.

Associated British Foods gained 4.1 percent to a 14-month high after the foods and drinks group increased its full-year earnings forecast on the back of strong results from its Primark discount chain.

Miners, which strengthened along with metal prices, were the second best performers.

Lonmin, reportedly a takeover target for Xstrata, rose 4.6 percent, with the latter 1.9 percent higher, while Vedanta Resources and Antofagasta climbed 2.2 and 1.9 percent respectively.

The oil price was in focus ahead of Wednesday's OPEC meeting which is expected to maintain current output levels.

Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy added between 0.3 and 3 percent.

Banks also saw demand with the Sunday Telegraph reporting Lloyds Banking Group, up 3.2 percent, is looking to convert 6.79 billion pounds worth of preference shares into common equity in a further bid to shore up its finances.

Barclays, Royal Bank of Scotland and HSBC were between 0.5 and 2.1 percent higher.

BA TAKING OFF British Airways gained 2.6 percent following a press report it was considering a bid for Lufhansa's UK airline BMI.

Weekend agreement by G20 finance ministers and central bankers to keep economic stimulus measures in place for longer added to the positive sentiment.

China is experiencing a ''V'' shape economic recovery and growth will be back to normal by 2010, the official Xinhua news agency reported on Saturday, quoting an adviser to the central bank.

With the United States closed for the Labor Day, however, the Cadbury news was the biggest influence, helping to lift other defensive sectors such as tobacco and beverages.

British & American Tobacco added 2.3 percent, Imperial Tobacco rose 2.2 percent while Diageo and SABMiller gained 1.8 and 2.3 percent respectively.

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