Miners support FTSE, M&A sends mid caps to record high

By Kit Rees and Helen Reid
FILE PHOTO:A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008. REUTERS/Toby Melville/File Photo

By Kit Rees and Helen Reid

LONDON (Reuters) - British shares started the week on a firm footing as mining stocks rallied, with deal-making helping the mid cap index to a record high.

The blue chip FTSE 100 index ended the day up 0.3 percent at 7,367.08 points, while the FTSE 250 gained 0.4 percent, posting a record close after hitting a new all-time high of 19,048.96 points.

Sterling offered little support, bouncing straight back up from a slight dip after Scottish First Minister Nicola Sturgeon announced her intention to trigger a second independence referendum, but said it would take place at the earliest in late 2018.

Mining stocks rallied almost 3 percent, and added around 15 points to the FTSE 100. Shares in Anglo American, Rio Tinto, Antofagasta and BHP Billiton rose between 2.5 percent and 4.9 percent as the price of copper recovered from its biggest weekly fall since December.

Precious metals miner Fresnillo was the top gainer, up 5.6 percent, while gold miner Randgold Resources also rose 1.8 percent as the price of gold edged higher.

Some of the more dramatic moves were among mid cap stocks, with deal-making fuelling a rise in Amec Foster Wheeler and John Wood Group's shares.

Amec Foster soared 15.4 percent, before paring back to close up 11.6 percent, after an offer from oilfield services company John Wood in a deal valued at around $2.7 billion. Acquirer John Wood's shares closed up 1.4 percent, after earlier jumping 5 percent.

"The currency devaluation, essentially, is what it is, so now we're getting to the stage where there are attractive opportunities in the slightly lower-capitalised companies as well," Ken Odeluga, market analyst at City Index, said.

Likewise Bovis Homes jumped 10 percent after peer Galliford Try made a bid for the homebuilder. The stock had its best day in eight months on the news.

Bovis rejected the bid but said it remained in talks with Galliford Try about a possible deal.

The housebuilder had also rejected a proposal from Redrow.

"We believe consolidation amongst two mid-cap homebuilders makes sense in order to gain scale and achieve cost efficiencies," UBS analysts said in a note.

"However, attractive returns achievable on land limits options for cash transactions, in our view. As such, a proposed share merger at a premium to book looks reasonable," they added.

Dominos Pizza was the top European faller, down 4.3 percent after Citigroup cut its rating on the stock to 'neutral', citing food inflation pressures and a highly competitive environment. The pizza maker had slumped 13.2 percent after its results last Thursday.

(Editing by Catherine Evans)

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