Footsie continues winning streak on BP takeover talk

The blue chip oil giant jumped to its highest level for more than a month amid takeover talk and encouraging progress on capping the Gulf of Mexico spill.

Its advance drove a 0.7 per cent gain on London's Footsie, which closed up 34.08 points at 5167.02.

But it was a poor day for the pound as sterling slumped against the US dollar after rating agency Standard & Poor's gave a negative outlook for the UK, despite reaffirming its AAA long-term rating.

The pound fell 0.4 per cent to 1.50 dollars on the news. S&P's blow followed the latest GDP figures, which showed growth unchanged at 0.3 per cent in the first quarter of 2010 – but there was some disquiet over a worse than expected collapse in exports as well as news that the recession was deeper than first estimated, with a 6.4 per cent decline.

US stocks slipped yesterday as China's weakening demand for materials and concerns over Europe's fiscal issues weighed on sentiment.

Investors looked ahead to the start of the earnings season, which started after the closing bell when Dow component Alcoa Inc reported its second-quarter results.

Other Dow components set to report earnings this week include Intel Corp, JPMorgan Chase & Co and General Electric Co.

"I get the feeling a lot of people are on edge. They're tentative. No one really knows what to expect" with this quarter's earnings, said Paul Brigandi, a trader with Direxion Funds in New York.

Among UK stocks, BP was the star performer with a rise of 341/8p to stand at 399p after weekend reports suggested ExxonMobil – already the world's biggest company – had sought White House approval for a move creating a 265bn giant. BP added that its latest efforts to contain the spill were on track with a new more efficient collection cap, although it has cost the firm 3.5 billion US dollars (2.3bn) since the crisis began 84 days ago.

BT shares lost some of the gains seen before the weekend after it reached a deal with union leaders for an "unprecedented" three-year pay rise. Shares fell 11/4p to 1383/4p.

Outside the top flight, shares in construction group Kier were 3 per cent higher, up 32p to 975p, after it flagged annual profits at the top end of market hopes. The firm said it had secured high volumes of work and added that previously mothballed private commercial projects were currently being resurrected.

Meanwhile, shares in Domino's Pizza failed to hold on to an initial gain seen after it posted a better-than-expected 28 per cent rise in half-year profits to 17.5m.

Like-for-like sales were up 17.2 per cent in the second quarter, but analysts focused on tougher prospects for the second half of the year as shares dropped 6p to stand at 397p.

And it was a mixed session for South West Trains operator Stagecoach due to a contrasting assessment of its prospects from two City brokers.

JP Morgan Cazenove upgraded the stock on the hope of a significant return of capital to shareholders, but Royal Bank of Scotland was more cautious and downgraded the company to sell from hold as it said it feared that Stagecoach's exposure to government spending cuts will come into focus. Shares were 23/4p lower to stand at 1813/4p.

The biggest Footsie risers were BP, Cobham ahead 53/4p to 2341/4p, Cairn Energy up 83/4p to 4591/4p and Antofagasta ahead 16p to 902p.

The biggest fallers were Kazakhmys off 31p to 1057p and Rio Tinto declining 70p to 31021/2p.