BRITAIN’S FTSE 100 edged higher yesterday, with healthcare and media sectors bolstered by transatlantic merger activity, helping outweigh a steep sell off in Barclays.
Drugmaker Shire – long viewed as a takeover target – added 2.4 per cent after US generic rival Perrigo agreed to buy Ireland’s Elan for $8.6bn (£5.6bn).
A proposed merger between Publicis and Omnicom to create the world’s biggest advertising agency, meanwhile, buoyed stocks of British peer WPP by 0.6 per cent.
Analysts at Credit Suisse said M&A activity in Europe is up on last year, recommending a basket of 17 stocks that are potential takeover targets, 10 of which are British.
They included seller of luxury raincoats and leather goods Burberry and software company Sage.
Anticipation of future deals helped the FTSE 100 close up 5.46 points or 0.1 per cent at 6,560.25 points.
“People have been predicting this for the last two or three years ... but the difference is that there is enough confidence now that you’ll actually be able to make a return on the cash to make it worthwhile,” said Peter Botham, chief investment officer at private bank Brown Shipley.
“I think it will be across the board ... You can pick the obvious one like pharmaceuticals and IT, but most sectors have got companies with pretty strong balance sheets.”
General retailers also held up well, with Next up 1.1 per cent and Marks & Spencer adding 0.6 per cent after Confederation of British Industry data showed retail sales growing at their fastest pace since January.
“If you are fund manager, I think it’s right to be looking at UK-centric situations rather than global,” Tim Steer, fund manager at Artemis, said. Of the top 30 most attractive UK stocks his models show, 19 are focused on the UK economy, he added.
On the downside, Barclays, the 13th biggest company in the index, retreated 3.5 per cent after saying it will give an update tomorrow on plans to meet tough new UK rules that could include a multi-billion pound share issue to help plug a capital shortfall.
Bank stocks weighed on European equities too, with speculation over Barclays causing an earlier rise on the markets to fizzle out by the close.
The pan-European FTSEurofirst 300 index closed flat at 1,205.18 points while the Eurozone’s blue-chip Euro STOXX 50 index slipped 0.1 per cent to 2,738.22 points.
The STOXX 600 European Banking Index fell 0.8 per cent, making it the worst-performing European equity sector, with Barclays taking the most points off the FTSEurofirst 300 index.
Investors throughout Europe were also showing caution as they await the outcome of a US Federal Reserve meeting this week to see if the Federal Reserve will scale back stimulus.