Deals and US results set Footsie loose

LONDON'S FTSE 100 index rose almost 1.5 per cent yesterday as investors 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.

Traders also got their teeth into a 2.5 billion takeover of Durex-maker SSL International by household goods firm Reckitt Benckiser - helping the London market gain 75.18 points to close at 5,214.64.

David Buik, senior partner at BGC, said: "We expect the markets to bounce around like a cork in the bath for the next three months responding to good and bad news accordingly."

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.

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. Against the euro sterling slipped below €1.19.

In London, BP contributed to the shares rise after investors welcomed confirmation of a deal to sell $7bn (4.6bn) of upstream assets, a move that will fund compensation claims from the Deepwater Horizon disaster in the Gulf of Mexico. BP shares were 12.45p higher at 399.9p.

SSL shares jumped 33 per cent in the FTSE 250 index, up 295p to 1,177p after it recommended a takeover offer from Reckitt Benckiser. Reckitt rose 110p or 3 per cent to 3,300p.

The deal comes two days after Tomkins, another second-tier stock, said it had received a takeover approach. Tomkins was up 1.1p to 300p yesterday while Invensys, seen as potential bid target, rose 10.5p to 280.5p.

Elsewhere in the top flight, British Airways took off with a 10.7p rise to 210.1p after US approval for its tie-up with American Airlines and Iberia.

Property firm Land Securities was 8.5p better at 589.5p after a well-received trading update boasted continuing momentum and the company fired the starting gun on its 350 million Trinity Leeds development.

Among the few Footsie fallers was medical instruments maker Smith & Nephew, which slipped 26.5p to 560.5p after traders reported Citigroup placing eight million shares at 559p.

Telecoms firm Cable & Wireless Worldwide was on the back foot again as analysts rushed out the red ink in the wake of yesterday's profit warning, which sent shares down 17 per cent. Citi, Credit Suisse and JP Morgan all downgraded the firm, which fell by 3.3p to 65.7p. Meanwhile Lambert & Butler maker Imperial Tobacco turned ex-dividend, meaning investors are no longer entitled to the latest payout. The shares fell 36p to 1,908p.