Prudential's share price rallies

AFTER dropping 20 per cent in two days, shares in Prudential recovered some ground yesterday on hopes for support for its massive Asian deal.

On Monday, the insurance group announced plans for the $35.5 billion (23.5bn) purchase of AIG's Asian life insurance arm, a deal that will require the UK's largest-ever rights issue.

Reports quoted sources close to Prudential yesterday as claiming that more than 30 banks have been lined up to sell the shares it is putting on offer, suggesting strong appetite for the deal.

But there was also some talk that the size of the drop in Prudential's shares may make the deal more dilutive than its existing investors are willing to put up with, suggesting the AIG transaction might fail.

Shares in Prudential rose by more than 4 per cent at one point yesterday, before closing up 12.5p, or 2.6 per cent, at 500p.

Elsewhere, a wave of spending cuts announced by the Greek government helped shore up market confidence by eroding fears over European sovereign debt.

The 4.3bn plan, which won early support from credit rating agencies, steps up austerity measures aimed at lifting the country out of the major financial crisis that has unsettled markets.

David Jones, chief market strategist at IG Index, warned on the Greek cuts: "It's still too early to tell whether this will be enough to convince the markets."

In London, the FTSE-100 index closed up 49.15 points at 5,533.21, while the mid-cap FTSE-250 rose 13.52 points to 9,612.17.

Standard Chartered provided some momentum for the financial sector, with the emerging markets-focused bank climbing 84p to 1,674p on better than expected results.

Barclays rose 8.1p to 329.9p and Lloyds Banking Group climbed 1.4p to 52.8p.

Insurer Aviva gained 11p to 390.2p ahead of today's annual results. Legal & General was also among the risers, up 3.7p at 76.95p.

Mining companies were among the big gainers, as the dollar dropped against sterling, with the pound once again worth more than $1.50.

Kazakhmys rose 70p to 1,516p, boosted by an upgrade from Barclays Capital, which increased its target price on the company by 300p to 1,900p. Lonmin topped the FTSE-100 index, closing up 104p at 1,942p.

Investor enthusiasm over broadcaster ITV's return to profit quickly wore off.

The firm topped the FTSE 250 risers board in early trading after it said advertising revenues were showing signs of improvement, including a forecast of growth of up to 20 per cent in April. But the stock fell back to stand down 0.1p at 55p.

Housebuilder Taylor Wimpey fell 3 per cent, despite reporting a steady start to its new financial year. Shares were off 1.25p to 36.7p.

Transport firm Arriva was a strong riser in the FTSE 250, after it increased its full-year dividend and said revenues trends were much improved in its rail division. Shares lifted 33p to 563p.

Scotland's largest oil services company, Wood Group, continued to win praise from analysts following Tuesday's full year results presentation. Analysts at both RBS Equities and Swiss bank UBS increased their target prices on the shares.

Having hit the highest level in 17 months on Tuesday, shares in Wood Group rose a further 2p to 372.8p yesterday.

On the Aim, Sportingbet, the online gambling firm, reported a 27 per cent rise in the amount its customers had gambled in the six months to 31 January, prompting analysts at both Numis and Daniel Stewart to up forecasts. But shares dropped a quarter of a penny to close at 63.25p.