Takeover talk lifts Footsie back into positive territory

Old Mutual, majority owner of Nedbank, saw its shares rise 37/8p or 3.2 per cent in value to 1247/8p, while HSBC rose 0.8 per cent, up 5p to 6391/4p.

The FTSE 100 Index followed suit, up 0.76 per cent after a 39.56 point rise to 5234.84, marking a welcome return to positive territory after three consecutive sessions in the red.

On the other side of the Atlantic, markets fluctuated as concerns over US recovery continued. The Dow Jones fell 0.5 per cent, after earlier gains.

Falling US technology shares weighed on the Nasdaq Composite index yesterday and offset gains by utilities, healthcare and other defensive sectors.

Tech shares fell on lingering concerns about the economic recovery and the impact on profits.

Recent weak economic data, including reports on employment and manufacturing, added to the cautious tone and depressed trading volume levels.

The S&P 500 was kept afloat by gains in utilities and healthcare stocks, traditionally considered defensive plays as they are less sensitive to the economy.

Both the Dow and S&P have notched two straight weeks of losses after stocks posted their best month in a year in July.

In the insurance sector, Aviva and Prudential moved higher as traders searched for the next candidates for mergers & acquisitions activity. Aviva led the top flight, up 131/2p, or 3.5 per cent, to 3911/4p, while Prudential rose 131/2p, or 2.4 per cent, to 571p.

Miners were in sharp focus in the UK and Australian markets as investors digested the implications of the country's inconclusive election result over the weekend.

The prospect of a hung parliament caused weakness in the Australian dollar early on, but stocks in mining companies rose as the Australian government's plans for a new tax on their profits were thrown into doubt.

Anglo-Australian mining group BHP Billiton was up 9p to 1830p in London as its aims to take over Canada's PotashCorp – the world's biggest fertiliser producer – also remained in the spotlight.

Potash, which has rejected the hostile approach, said it had been approached by third parties since news broke of BHP's 40 billion US dollars (25bn) bid. Other miners on the rise included Lonmin, up 24p to 1531p, and Anglo American, 231/2p ahead at 23631/2p.

After a shaky start, gas explorer and production group BG held on to last week's stellar gains seen on speculation that two possible bidders were willing to pay at least 16 a share, valuing the company at around 54bn. It was ahead 11/2p at 1093p.

In the FTSE 250, Lloyd's of London insurer Amlin lost 3 per cent, down 133/4p to close at 4081/4p, as its half-year results missed analyst expectations.

The group's profits slumped 39 per cent after it was hit by the Chilean earthquake and windstorm Xynthia in Europe.

Rival Hiscox also suffered from claims relating to the natural disasters, but shares were 1 per cent up – 31/4p higher at 347p – as interims topped market forecasts.

The pound rose to an eight-week high against the euro amid ongoing concerns over the state of European recovery, after the preliminary composite purchasing managers index for the eurozone fell to 56.1 in August from July's 56.7.

But the pound slipped against the dollar to 1.55 as a slide in US markets suggested a chill in demand for risky assets.

The biggest Footsie risers were Aviva, Petrofac ahead 48p to 1410p, Old Mutual and Sainsbury ahead 103/4p to 3661/2p.

The biggest Footsie fallers were Aggreko down 41p to 1467p, Eurasian Natural Resources off 191/2p to 849p, Inmarsat down 11p to 659p, and African Barrick Gold off 9p to 5631/2p.