FTSE to break through 6,000 on M&A rumours

ALTHOUGH clearly nervous around the psychologically significant 6,000 barrier, London’s blue chip index looks set to build on Friday’s gains, with defensive stocks providing the momentum.

In 24-hour trading, GFT is forecasting the UK index to open up 20 points from last week’s close, at around 6,016. The German DAX is quoted to open up 27 points at 7,205 and the French CAC is called up 15 points at 3,989.

Following Goldman Sachs’ suggestion that the UK tobacco sector is ripe for consolidation, the M&A rumour mill is in top gear, with British American Tobacco and Imperial Tobacco likely to benefit the most from the speculation.

Broad direction for the rest of the holiday-shortened week will come from earnings.

In Europe, we have Tesco tomorrow and Nokia – preparing to start its partnership with Microsoft – on Thursday, and from the US there are first-quarter results due out from the financial giants Citigroup, Wells Fargo, Goldmans and Morgan Stanley – the sector is generally expected to release weaker profits so there is surprise potential to the upside – as well as telecoms heavyweights AT&T and Verizon.

So far the US results have been largely disappointing, including those from Google and Bank of America, yet the Dow managed to shrug that off on Friday and rally off its lows for the week – which should also add to a positive lead for European stocks today.

Trading volumes on the underlying exchanges could start to thin out as the week progresses, ahead of the approaching double bank holiday weekends, although that could just be sufficient to let the UK index drift higher, targeting the next resistance level forming around 6,050.

Martin Slaney is director of GFT’s global dealing operations