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M&A talk helps FTSE claws back up from 11-week low

Britain’s FTSE 100 staged a mild comeback on Monday, clawing back up from Friday’s 11-week low; Eurasian Natural Resources (ENRC.L) the topped index, while Aggreko (AGGK.L) was its biggest loser.

 

Britain’s FTSE 100 staged a mild comeback on Monday amid merger and acquisition talk, clawing back up from Friday’s 11-week low ahead of key UK inflation data tomorrow.

The benchmark index of blue-chip shares added 0.13%, or eight points, to 5,773 and the Mid-250 index eased 0.1%, or seven points, to 11,780.

‘After weeks of falling markets, the old chestnut of M&A chatter has helped to lift sentiment and given blue chips a modest kick-start, said David Jones, chief market strategist at IG Index.

He was referring to a report in the Sunday Times that commodities trader Glencore (GLEN.L) was considering a £12 billion takeover bid for Kazakh miner Eurasian Natural Resources (ENRC.L).

The stock, whose shares have slumped 16% in the past month, jumped 35p, or 4.7%, to 782p.

Pointing out that the report had not ‘elicited much in the way of an official response,’ Jones added: ‘However, with ENRC hanging onto its 5% gain throughout the day, it looks as if the market feels this story has some foundation.’

Actual M&A activity lifted US stock indices. VF Corp, whose brands include Wrangler denim, agreed to buy outdoor clothing firm Timberland for about $2 billion (£1.2 billion) and Allied World Assurance Co Holdings agreed to buy reinsurer Transatlantic Holdings for $3.2 billion.

The Dow Jones Industrial Average took on 0.11% to 11,965 and the Standard & Poor's 500 index gained 0.09% to 1,272; but the Nasdaq Composite index slid 0.13% to 2,640.

Meanwhile, investors awaited the publication on Tuesday of Britain’s consumer price index. Economists forecast the official gauge of inflation to hold steady at 4.5%, according to a Reuters poll.

Jonathan Loynes, economist at Capital Economics, said the consultancy expected the headline inflation rate to have dropped back to around 4.3% in May. ‘But this is likely to prove just a temporary pause in an upward trend which could now take inflation towards 5.5% when the utility price hikes kick in later this summer,’ he added.’

China is also due to release inflation data, and the United States is set to produce a report on retail sales.

Ahead of the figures, sterling strengthened 0.45% against the dollar to $1.601, and gained 0.14% versus the euro to €1.135.

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