FTSE steadies near 2-month high

A trader monitors the screen on a trading floor in London.

A trader monitors the screen on a trading floor in London.

Published Nov 24, 2014

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London - Britain's top share index steadied near a two-month high on Monday, with Aviva sliding after outlining a deal to buy Friends Life and Petrofac slumping after predicting a low net profit.

Aviva fell 3.9 percent after saying on Friday it had agreed terms on a possible deal to buy rival Friends Life for 5.6 billion pounds (R97 billion), as British pension reforms put pressure on insurers to find new business.

Friends Life rose 7.3 percent.

“The news from Friday evening has placed the UK life assurance sector on the centre stage. Cost savings are likely to prove a major factor for shareholders,” said Keith Bowman, equity analyst at Hargreaves Lansdown.

The deal should produce cost and revenue synergies of 1.7 billion pounds, more than offsetting the offer premium of 700 million pounds, Bernstein analysts said in a client note.

They said it was “a good deal for shareholders of both Friends Life and Aviva but, on the face of it, a better deal for Friends”.

Petrofac sank 23.7 percent, its worst one-day percentage drop ever, after the oil and gas services firm said it expected net profit in 2015 to be around $500 million - towards the lower end of its previous guidance range of $580 million to $600 million.

The benchmark blue-chip FTSE 100 index was flat at 6 750.95 points by 10:57 SA time.

It closed 1.1 percent higher after hitting a two-month high on Friday, marking a fifth straight week of gains, after a surprise interest rate cut in China boosted mining and commodities stocks.

Miners fell the most on Monday, with the UK mining index dropping 1.3 percent following a retreat in major industrial prices on concerns about demand for raw materials.

Shares in major miners BHP Billiton, Rio Tinto and Anglo American fell 1.7 to 2.1 percent.

Among other sharp movers, London Stock Exchange rose 2.2 percent to a record high, making it the top gainer on the FTSE 100, after positive broker updates, traders said.

Citi raised its stance on the stock to “buy” from “neutral” and raised its price target to 2 400 pence from 1 750 pence, while Morgan Stanley added London Stock Exchange to its “most preferred list”. - Reuters

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