Markets: Profit-taking tarnishes shine of BAE

By DOMINIC JEFF
Published on 14/09/2012 00:02

SHARES in defence giant BAE Systems surrendered Wednesday’s gains as analysts said the proposed merger with continental peer EADS faced obstacles and the potential advantages could be slow to materialise.

The firm closed down more than 7 per cent yesterday at 337.1p as investors took profits from the previous session amid concerns that the merger was already fully priced in.

Andrew Gollan, an analyst at Investec, said: “We do not envisage major competition issues although a drawn-out approval process is inevitable. The share prices already broadly reflect the proposed ownership split and we advise BAE shareholders to cash-in.”

Societe Generale and Oriel Securities also reduced their ratings on the stock. Rolls Royce was a beneficiary as traders looked for an alternative investment in the defence sector. Its shares added 3 per cent to end the day at 854p, taking it to the top of the blue chip risers’ board.

The FTSE 100 index closed 37.8 points higher at 5,819.9 amid anticipation that US policymakers would unveil a new round of emergency support. The Federal Reserve obliged after the London market closed with plans to buy $40 billion (£25bn) of mortgage-backed securities a month.

NEW YORK: The Standard & Poor’s 500 index closed at its highest level since December 2007 after the Fed’s aggressive action to bolster the US economy encouraged investors to dive back into the market.

The Dow Jones industrial average rose 206.51 points, or 1.55 per cent, to close at 13,539.86 while the broader S&P 500 closed up 23.43 points, or 1.63 per cent, at 1,459.99. The Nasdaq Composite Index ended the day up 41.51 points, or 1.33 per cent, at 3,155.83.