London Stock Exchange surges as speculation over merger circulates

BRITAIN’S top share index edged higher yesterday helped by a bounce in several heavyweight banking stocks.

But the London Stock Echange gathered the most attention, with a late surge before the close sparked by speculation of a potential tie-up with its Singaporean counterpart.

The talk follows the LSE’s recently announced joint venture with the Singapore Exchange enabling cross trading of its largest securities.

Market rumours suggested a takeover price of around £13.50 per share. The British bourse’s shares surged to 1,028p before finally closing up 21p at 1,023p.

The LSE refused to comment.

Meanwhile, after falling 2.5 per cent in the previous three sessions to near a technically oversold level, HSBC, in focus during a US Senate hearing on money laundering that some analysts said could result in a $1bn fine, rose 0.6 per cent.

Fellow Asian-focused peer Standard Chartered led sector gainers, however, with a gain of 2.3 per cent.

“Banks are recovering from a few difficult trading sessions regarding the issues with Libor and HSBC more recently,” said Michael Symonds, a strategist at Daiwa Capital Markets.

The cyclical sector led the market higher, adding a total of 8.7 points to the broader FTSE 100, which ended up 0.5 per cent, or 28.42 points, at 5,714.19 points.

The index had struggled to breach and hold above 5,700 points during the last two weeks and in spite of doing so yesterday, Dmytro Bondar, a technical analyst at RBS, cautioned of the potential for a marked slide in the coming days.

“It has been in this upper-sloping bearish channel since the beginning of June ... What is important is that it stays within the channel as once the price falls below the lower limit and we get a few negative days, it could be a trigger for a major sell-off,” he said.

In spite of the market gains, volumes were low at just 79 per cent of the already weak 90-day daily average.

Miners added their weight to the index gains and continued a recent recovery, led by Rio Tinto, up 1.7 per cent and BHP Billiton, up 1.4 per cent, helped by gains across the base metals complex on hopes for fresh China stimulus.

“Miners are doing well because copper has had a very good run today, that’s mainly based on hopes of more easing in China over the weekend,” said Ioan Smith, a strategist at Knight Capital.

Emerging markets were a key factor dragging the worst-hit sector, integrated oils, lower after gas firm BG Group, down 2.1 per cent, was hit by a Credit Suisse downgrade to “neutral” from “outperform” on the back of production headwinds in Brazil.

The biggest drag on the index, however, was telecommunications company Vodafone, which saw a sharp drop in its share price towards the end of the session after hopes for a special dividend from its US joint venture dimmed. The fall came after a Verizon executive said that the distribution of a dividend payment to Vodafone from their joint Verizon Wireless venture would not be discussed the firm's next quarterly board meeting.

Vodafone stock, which had been bid up in anticipation of the dividend, fell 1.2 per cent in heavy volume of more than one and a half times its 90-day daily average.