BRITISH Airways shares have been hit by fears over strikes in recent weeks but were boosted yesterday on signs of progress in its tie-up with Iberia.
Miguel Blesa, the chairman of Caja Madrid, the bank that owns 23 per cent of Iberia, said yesterday that "there is very little left to agree" about a merger that would leave BA shareholders with 55 per cent of a joint company.
Talks between the two airlines about a merger have been ongoing since halfway through 2008 and appeared to be drifting until an outline of the agreement was reached in November.
Blesa said February would be crucial for the talks but he expected a deal to be announced by mid-March.
Shares in BA rose 2.9 per cent to 200.4p, their highest level in more than a month.
Elsewhere, shares in London drifted for most of the session, with the FTSE-100 more than 50 points lower during the session, before a strong start in New York pushed the leading index higher. It closed up 18.75 points at 5,513.14.
Cadbury shares jumped as it announced an agreed 11.9 billion takeover by Kraft after the American food group increased its offer level and the amount of cash available.
Shares closed up 29p, or 3.6 per cent, at 836.5p, close to the 850p level the offer implies.
Burberry was the FTSE 100 top performer, after the luxury clothing group said sales during the Christmas period had been better than expected and it looked forward to growing profits in the coming months.
Shares rose 8.3 per cent to 649p.
Banking shares were down on results from Citigroup, which posted a 5bn bad debt charge for the final three months of 2009, as well as a report from ratings agency Fitch.
The report warned that there could be further credit downgrades among the banking sector as profits came under pressure as assets deteriorate "and increasingly intense competition for funding from governments and corporates".
Lloyds Banking Group was the Footsie's biggest faller, down 2.6 per cent to 57.07p, while Barclays lost 1.8 per cent to 312.1p.
Royal Bank of Scotland bucked the trend, up 2.95 per cent to 38.34p, a high of more than two months.
Pearson, owner of the Financial Times, fell despite saying it was seeing the first signs of improvement in the newspaper advertising market and predicting a 10 per cent increase in adjusted earnings. Shares dropped 18p to 891p.
The retail sector also suffered from a broker downgrade after HSBC revised its position on a trio of retailers, including Home Retail Group, to neutral from overweight.
There were also fears over the impact of inflation, which jumped sharply after a higher-than-expected rise in the cost of living last month.
Argos owner Home Retail was down 3.5p to 264.3p, while Marks & Spencer lost 4.4p to 356.2p. Outside the top flight, Currys owner DSG dropped 0.92p to 35.88p.
Water company Severn Trent lifted 3 per cent despite revealing it planned a one-off dividend cut of 10 per cent in order to meet regulator Ofwat's recent ruling that it reduce households bills by 4 per cent by 2015. The dividend cut was less severe than many analysts had feared and shares rose 34p to 1123p.
Pharmaceutical companies made hay on signs of a possible Republican win in the battle for the senate seat in Massachusetts. The vote could scupper US president Barack Obama's hopes of health reform. GlaxoSmithKline rose 24.5p to 1,284.5p and AstraZeneca jumped 49.5p to 3,067.5p.