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A couple of familiar names are set this week to stage a welcome return to the list of blue-chip companies that make up the Footsie 100 index.
The regular quarterly review of the index on Wednesday is expected to see luxury goods retailer Burberry promoted from the FTSE 250 index back into the top flight having been demoted earlier this year. The Burberry share price was trading 15.3p higher at 503.5p today having more than doubled in value since the start of the year. Only last week, Bernstein raised its rating on the shares from underperform to market perform, but also jacked up its 12-month target price from 360p to 520p as it appeared to try and do a bit of catching up. The company now boasts a price tag worth £2.05 billion.
Burberry will be joined by Rentokil Initial which fell from grace five years ago following a series of profit warnings and boardroom bust-ups. This culminated in the departure of chairman Sir Clive Thompson, who was dubbed “Mister 20%” following his record of producing steady earnings growth over the years. The shares slumped to a low of 33¼p in November, and were today changing hands 0.9p dearer at 113.9p. Burberry and Rentokil will be joined by property developer Segro, the old Slough Estates, which has made strong progress since refinancing itself with a £500 million rights issue in March. The shares, up 5.5p at 349.8p, have rallied from 176p since the start of April. The securities house Investec, down 7.2p at 430.2p, is also tipped to make its debut among the top flight following the decision of Thomson Reuters, down 31p at 1872p, to delist in London.
They will replace the likes of water provider Pennon, 5.9p better at 467.9p, which has slumped from 507p since the start of July, despite the market generally having rallied by almost 40% since March. Pennon's capitalisation has shrunk to just £1.6 billion. Two others also facing the boot are Balfour Beatty, 8.9p better at 346.2p, and the asset manager Foreign & Colonial, 5p dearer 239.1p. The changes will be based on share prices at the close of business tomorrow.
Shares generally made an encouraging start to the week supported by the news that Cadbury, up 222p at 790p, had rejected a £10 billion approach from US food giant Kraft Inc, and better-than-expected results from Associated British Foods, up 33p at 845½p. But with Wall Street closed today for Labor Day, few investors were willing to open fresh positions. Even so, the FTSE 100 index climbed back above 4900 with a rise of 81.4 to 4933.1, ending a three-day losing streak. But trading conditions were described as pitifully thin.
The miners enjoyed another strong showing, although most of them traded below their best levels of the day after the dollar shaded against the euro. That included Lonmin, which touched an intraday high of 1722p, before paring back its lead to 72p at 1650p, on revived talk that Xstrata, up 19p at 852p, may try again to win control. Lonmin's price has been driven up from 1361p last week.
Xstrata's original bid last year valued the South African-based platinum producer at 3300p a share. That failed, but speculators claim Xstrata may fancy its chances more now that the price has subsided to a more realistic level.
However, Liberum Capital reckons all the speculation has been overdone. “We consider it unlikely that Xstrata will stump up the $4 billion-plus required for a Lonmin take out that would re-stretch its balance sheet to $17 billion (£10.3 billion),” it said.
For the time being, Xstrata is pursuing its proposed merger with Anglo American, up 19p at 2020½p, although little progress has been made to date.
Oil shares were back in focus ahead of Wednesday's scheduled meeting of Opec members. Tullow Oil advanced 27p to 1083p and Royal Dutch Shell put on 12p to 1652p.
Lloyds Banking Group firmed 4.5p to 106.3p with still no sign of the rights issue many in the City have been forecasting. ING continues to rate the shares a hold, but has raised its sights on the price from 70p to 100p.
British Airways climbed 3p to 192½p despite weekend reports claiming it is in talks with Germany's Lufthansa to buy rival UK airline BMI. BA is already in talks about a merger with Spain's Iberia.
Deutsche Bank has begun coverage of British Airways with a hold rating and 175p target. It also has a buy rating and 417p target on easyJet, up 8.2p at 329.1p.
