London shares higher midmorning as investors bet UK rates will be held for now

London shares higher midmorning as investors bet UK rates will be held for now

	Published : Wed, 21 Mar 2007 12:19 By : Agencies Print this Story

LONDON (AFX) - Leading shares moved higher mid-morning as the latest minutes from the Bank of England eased fears of a imminent rate hike and added to ongoing sector consolidation hopes, this time in the property sector, dealers said.

At 10.30 am, the FTSE 100 index was 20.7 points firmer at 6,241.0, touching session highs and reversing earlier losses.

Volume was heavy with 696 mln shares changing hands in 122,331 deals.

Sentiment was given a lift after the Bank of England's rate-setting body voted 8-1 in favour of keeping the benchmark repo rate unchanged at 5.25 pct at its most recent meeting, with one member calling for a cut.

Analysts were expecting a 7-2 vote for unchanged rates, and all pundits believed any dissenters would have voted for a rate hike.

Attention will now turn to this US rate decision later today, with the market expecting the FOMC to hold the cost of borrowing for now.

In equities, property stocks helped to edge blue chips higher on ongoing sector consolidation hopes, with Hammerson flirting with record highs on talk the group is being eyed by GE Real Estate.

The group has been buoyed in recent days by long-running rumours it could also be vulnerable to a bid from French peer Unibail.

The sector was further in focus on vague hopes Chancellor Gordon Brown may ease current regulations on REITs (real estate investment trusts) in today's Budget, but experts downplayed the likelihood saying the current laws have only been in place a few months.

Hammerson gained 59 pence at 1,714, Land Securities climbed 45 to 2,169, Liberty International was 2 better at 1,233 and British Land took on 22 to 1,559, further lifted by news of a 650 mln stg property deal with supermarket Tesco.

Selected financials were also courted as the planned mega-merger between Barclays and Dutch peer ABN-Amro gathered pace and after Goldman Sachs upgraded the European banking sector to 'overweight' from 'neutral'.

According to the Financial Times, Barclays is negotiating an offer that is expected to be in shares with a small cash element -- with the two sides thought to be close to a deal on price.

Meanwhile, The Times reported the two companies are mulling a 10 bln stg cash sweetener to shareholders financed by the sale of ABN's US business LaSalle.

The Times said Barclays is open-minded about asset sales and regards LaSalle as both non-core and capable of generating a big merger dividend to appease shareholders on both sides.

Meanwhile, in a portfolio strategy note, Goldman Sachs said said recent fears over the US sub-prime mortgage market have been overplayed and current valuations now offer a buying opportunity.

Barclays took on 3 at 705, Royal Bank of Scotland added 26 at 2,026 and HBOS added 9 at 1,051.

Imperial Tobacco, which last week initiated a long-anticipated attempt to buy rival Altadis, took on 11 at 2,261 after it said 2007 results will come in in line with management's expectations.

The group, which made no reference to the takeover approach in an annual trading statement, added it is seeking additional annual cost savings of around 30 mln stg over the next few years.

Imperial was in further focus after ABC said the UK group will announce a 50 eur per share offer for Altadis on Thursday or Friday this week.

Elsewhere, Compass added 3 at 319-3/4 on market talk the group could be subject to a MBO. Yesterday, the rumour mill resuscitated talk that peer Sodexho could be casting an acquisitive eye over the caterer.

Meanwhile, broker comment helped BSkyB claw back some of yesterday's regulation inspired losses, up 7-1/2 at 561-1/2, after Bear Stearns upgraded the broadcaster to 'outperform' from 'peer perform'.

In a note to clients, the broker said the stock has underperformed the market over the past three years as capex and investment have ramped up while subscriber growth and other indicators have shown slowing growth.

However, it believes BSkyB's 'competitively priced triple-play offer' will lead to a reversal in the recent key performance indicator trends.

Cable & Wireless took on 2.9 pence at 170.9 as Morgan Stanley raised its price to 190 pence from 175 as it kept its 'overweight' recommendation.

Morgan Stanley said it sees further value for a potential acquirer of the group through a full separation of the telecom group's two main businesses.

And Cadbury Schweppes rose 16 at 651 thanks to an upgrade to 'overweight' from 'equalweight' at Lehman Brothers following last week's news of the separation of its confectionery and Americas Beverages businesses.

In contrast, Whitbread was one of the main casualties this morning, down 40 at 1894 after big gains yesterday spurred by talk of a private equity bid at 2,300 pence per share.

On the corporate front, Smiths Group eased 2 to 1,038 as ongoing fears over the weak dollar offset first half results which were higher than consensus estimates.

Earlier, the security and medical equipment maker reported a 7 pct rise in H1 headline pretax profits to 134 mln stg for continuing operations, despite a significant impact from the weaker dollar, the company said.

Ex-dividend stocks also weighed, shaving 9.5 points off blue chips with HSBC, Bradford & Bingley and Intercontinental Hotels all hit.

HSBC was further hit, down 14 at 884, after The Wall Street Journal said the London-based bank or Citigroup from the US could launch an eleventh-hour bid for ABN Amro themselves.

On the second-line, Abbot Group lost 9-1/2 at 286-1/2 after over 28 mln shares in the company were sold by Arne Blystad, chairman of Songa Drilling, the Norwegian oil rig operator Abbot bought last year.

The shares, which account for 12 pct of Abbot, were issued to Blystad as part of the acquisition.

Blystad's shares in Abbot were held by Spencer Energy AS, in which he holds a controlling stake. The shares were placed in the market this morning by Goldman Sachs.

In economics, all eyes will be on the Chancellor of the Exchequer Gordon Brown as he delivers his likely swansong budget at 12.30 pm.

The market will be looking for an upbeat appraisal of the UK economy over the last ten years and expecting the unveiling of what a Brown-led government would do on the environment over the coming years.

Analysts expect Brown to maintain his most recent GDP forecast from last December's pre-budget. Brown forecast that the UK economy will grow by between 2.75-3.25 pct this year, above the 2.7 pct recorded in 2006.

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