BRITAIN’S blue-chip index halted a three-day slide yesterday as buyers moved to take advantage of beaten-down prices to place bets on possible takeover targets and pile into more defensive shares.
The FTSE 100 closed up 27.16 points, or 0.4 per cent, at 6,276.94 after dropping 1.5 per cent on Friday, when much weaker than expected jobs data from the United States sent the FTSE to a two-month low.
Yesterday’s rebound, albeit modest, suggested appetite for shares had not disappeared, thanks to sustained monetary stimulus from central banks across the globe.
“Clients have been waiting for a meaningful pullback where they could buy at some decent levels,” said Manoj Ladwa, head of trading at TJ Markets.
“There could be a little more to go on the downside, but traders are still willing to dip their toes in just in case the market does carry on rallying.”
Ladwa said he was “net short” UK blue chips, meaning he had more negative than positive positions, but he cautioned he had set automatic buying orders, or stop losses, just above current levels, fearing further gains.
Among stocks he had been buying were food retailers Tesco and Sainsbury, up 1.4 per cent and 0.7 per cent, seen as defensive options if demand for superfluous goods were to fall due to worsening economic conditions.
He also bought mobile operator Vodafone, which had fallen five per cent over the previous three sessions, as it offers reliable earnings and is seen as the possible target of a bid from US partner Verizon.
Vodafone and food retailers were among the biggest contributors to the FTSE’s rise, adding around 23 points.
Bid speculation also boosted oil equipment maker Weir, which rose 4.2 per cent on news General Electric is buying oilfield pump maker Lufkin Industries at a 38 per cent premium to Lufkin’s closing price on Friday.
Traders said Weir was itself seen as a possible bid target, leading investors to cover their negative positions on the stock, the third most-shorted on the FTSE 100, according to Markit data as of the close on 5 April.
Russia-based precious metal miner Polymetal, which trades at one of the lowest valuation multiples among UK blue chips, rose 5.3 per cent to the top of the FTSE after unveiling a 30 payout on its 2012 net profit.
The broader mining sector, which has fallen 13 per cent so far this year compared with a 6.4 per cent rise on the broader index, rose 0.8 per cent as investors bought back into some of the most battered names, such as Eurasian Natural Resources Corporation (ENRC), up 1.7 per cent.