London - Britain's blue-chip index rose on Wednesday, helped by a rise in engineer Meggitt, at the centre of bid speculation, and a bounce in mining stocks after a strong update from Rio Tinto and positive growth data from China.
Shares in Meggitt rose 7.2 percent to 525 pence after the Daily Mail, citing dealers, wrote that the US firm United Technologies Corp could be preparing a 625 pence cash offer for the British engineering firm.
Meggitt is a key player in the aerospace sector, which is meeting this week at Farnborough for an industry event.
It declined to comment on the report.
UTC did not immediately respond to a request for comment.
The prospect of a potential bid led speculative sellers to close their negative bets, or “shorts”, on the stock, which had fallen nearly 9 percent since late June, traders said.
“I don't think there will be a huge amount of people going long on the back of this but people who were short would be scrambling to cover,” said Mark Ward, head of execution trading at Sanlam Securities UK.
“I'd probably be a little bit sceptical (on any bid materialising) to be honest.”
Short sellers - who borrow a stock and sell it, betting they will be able to buy it back at a lower price before returning it to the lender - have targeted Meggitt over the past month.
Around 5.7 percent of Meggitt's shares available to be borrowed were out on loan on June 14, up from 0.4 percent on June 10, Markit data showed.
It was the top riser on the FTSE 100, which was up 30.79 points, or 0.5 percent, at 6,741.24 points, recouping most of the losses suffered in the previous session, when Federal Reserve Chair Janet Yellen voiced concern over valuations.
Also supporting the index were mining stocks after Rio Tinto, up 1.6 percent, reported a sharp rise in iron ore output in Australia, and Chinese growth data slightly beat expectations.
Rio Tinto aggressively expanded shipments to China in the second quarter, banking on its low costs to displace local producers.
“We expect Rio Tinto shares to outperform the sector this morning, on the back of solid production results,” analysts at Societe Generale wrote in a note.
“We also expect iron ore prices to recover soon as more than half of the Chinese iron ore mines should not be viable at current prices.” - Reuters