Takeover approach for SSL helps City make strong rise

The FTSE 100 rose more than 1 per cent yesterday as markets were cheered by strong US corporate results and a major acquisition at home.

Banks Morgan Stanley and Wells Fargo both beat forecasts with second-quarter figures, following on from a 78 per cent hike in profits from US technology giant Apple overnight.

And traders also got their teeth into a 2.5bn takeover of Durex maker SSL International by household goods firm Reckitt Benckiser – helping the London market add 75.18 points to 5214.64 at the close.

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Wall Street's Dow Jones Industrial Average trod water in early trading following gains overnight as traders awaited testimony from US Federal Reserve chairman Ben Bernanke on the health of the economy.

Anxious investors hoped the Fed chief would provide a fresh outlook on the health of the world's biggest economy as well as policy signals from the central bank.

Some traders said Tuesday's late rally came on speculation the Fed would try to spur lending by eliminating the interest paid on excess bank reserves held at the Fed.

"Tuesday, the rumours were the rally was sparked ahead of what Bernanke potentially might say. Now we've got some apprehension here," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio.

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Minutes from the Bank of England's July meeting showed Andrew Sentance again making the lone call for a rate hike, although rate-setters noted the potential impact of the emergency Budget on growth and considered the case for further support to the economy.

The pound eased below 1.52 against the dollar after reaching highs above 1.53 earlier in the session. Sterling slipped below 1.19 against the euro.

In London, BP contributed to the shares rise after investors welcomed a deal to sell 7 billion US dollars of upstream assets, a move that will fund claims from the Deepwater Horizon disaster in the Gulf of Mexico. Shares were 121/2p higher at 3997/8p.

And SSL shares jumped 33 per cent in the FTSE 250 Index, up 295p to 1177p after it recommended a takeover offer from Reckitt Benckiser. Reckitt rose 110p to 3300p or 3 per cent. The deal comes two days after Tomkins, another second-tier stock, said it had received a takeover approach from a Canadian-backed consortium.

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Tomkins was up 11/8p to 300p yesterday while Invensys, which is seen as potential bid target, rose 101/2p to 2801/2p.

Elsewhere in the top flight, British Airways took off with a 5 per cent, or 103/4p rise to 2101/8p, after US approval for its transatlantic tie-up with American Airlines and Iberia.

Land Securities was 1.5 per cent, or 81/2p better off at 5891/2p, after a well-received trading update boosted continuing momentum and the firm fired the starting gun on its 350m Trinity Leeds development.

Among the few Footsie fallers was medical instruments maker Smith & Nephew, which fell 261/2p to 5601/2p after traders reported Citigroup placing 8 million shares at 559p.

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Telecoms firm Cable & Wireless Worldwide was on the back foot again yesterday as analysts rushed out the red ink in the wake of Tuesday's profit warning, which sent shares down 17 per cent.

Citi, Credit Suisse and JP Morgan all downgraded the firm, which fell by 31/4p to 653/4p.

Meanwhile, Lambert & Butler maker Imperial Tobacco turned ex-dividend, meaning that investors are no longer entitled to the latest payout. Shares lost 36p to 1908p.

The biggest Footsie risers were Kazakhmys up 72p to 1106p, British Airways, Antofagasta up 45p to 981p and Investec ahead by 191/8p to 4843/4p.

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