ES in Invensys surged by 27 per cent yesterday on talk of a bid from US rival Emerson Electric. The rumours suggested Emerson was mainly interested in the company’s controls business and not the rail division, but would be willing to buy the whole lot to achieve its aims. That was enough to see Invensys jump 54p to 257p, valuing the company at more than £2bn.
Meanwhile, expectations for more monetary stimulus sent Britain’s top share index to a seven-week high yesterday, but investors cautioned those gains may be vulnerable if the Eurozone debt crisis deepens further.
Investors were beefing up their equity holdings ahead of the US Federal Reserve’s expected decision to extend its bond-buying programme, dubbed Operation Twist and aimed at shoring up the US jobs market.
The US central bank said after the European market close that it would buy $267bn in longer-dated securities by the end of 2012.
“We are positioned for Operation Twist to be mentioned in the Fed statement, so we’re not selling before the meeting results, but we reinvested in equities two weeks ago so we have a good profit margin at this point,” said Lorne Baring, managing director of B Capital Wealth Management.
“We still expect a bumpy ride as investors lack confidence there will be progress at the sovereign level in Europe. A worsening situation in Europe could cause us to take profit once more.”
The FTSE 100 index rose 35.98 points, or 0.6 per cent, to 5,622.29. Trading volumes totalled 96 per cent of the 90-day average.
The index was up around 360 points from a six-month low hit in late May, when poor US jobs data started speculation about further central bank support.
The Bank of England also signalled yesterday that it was close to releasing a wave of new money into the shrinking British economy because of the worsening Eurozone debt crisis.
Shore Capital expected such a move by the Bank would reverse some of the strength seen in sterling over the past six months, benefiting exporters from the UK.
It highlighted global stocks such as chip designer Arm Holdings, engineer IMI and technology firm Smiths Group, which all gained between 2.3 per cent and 2.6 per cent on the day.
Also on Shore’s list was software company Sage Group, which rose 5.5 per cent as it increased its global exposure by acquiring a 75 per cent stake in Brazil’s Folhamatic Group, leading brokers to upgrade their expectations for the stock.
Meanwhile shares in insurance group Aviva jumped 4.7 per cent as it unveiled job cuts in its regional UK offices.
Whitbread, which impressed the market with its first-quarter results on Tuesday, rose a further 4.7 per cent yesterday.
On a thin day for corporate news, ITV jumped three per cent on speculation of a buyout and engineering group Invensys gained a whopping 26.6 per cent on talk of a bid from US rival Emerson.
On the down side, Severn Trent saw its shares slide to the bottom of the FTSE 100 fallers’ list as it went ex-dividend. United Utilities followed it lower, dropping two per cent.
Experian and Land Securities, down 0.4 and up 0.3 per cent respectively, also traded ex-dividend.
Further afield, the FTSE Eurofirst 300 index of top European shares rose 0.5 per cent.