November 12, 2009 2:00 am

Insurers at the fore as Footsie pushes towards 5,300 level

Insurers were among the top performers yesterday as the FTSE 100 tested its highs of the year.

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led the way, rising 5.5 per cent to 85¾p - a strength some traders attributed to renewed speculation about a possible break-up bid. Resolution , up 0.2 per cent to 97¼p, was again named among the likely predators.

However, analysts placed much more significance on a consultation document from the European regulator suggesting compromise on solvency requirements for annuity writers.

The Committee of European Insurance and Occupational Pensions Supervisors indicated that it might not apply to existing annuities a rule forcing insurers to hold extra capital. Enforcement would have required the UK life sector to find an additional £50bn, according to the Association of British Insurers.

"The risk of substantial capital raises . . . is probably off the table," Morgan Stanley analyst John Hocking said.

L&G had been seen as most vulnerable, followed by Aviva (up 3 per cent to 408p) and Prudential (ahead 1.9 per cent to 605½p).

The FTSE 100 rose 36.2 points, or 0.7 per cent, to 5,266.75. During the session, strength in the mining and property sectors helped push the index through 5,300 to its best level since September 2008.

Precious metals producers were in demand as a weak dollar squeezed gold to a record high. Fresnillo added 5.9 per cent to 892p and Petropavlovsk took on 7.1 per cent to £13.05.

Randgold bounced 6.1 per cent to £48.58, having slipped on Tuesday in the wake of weaker-than-forecast results. Merrill Lynch raised its price target on the stock to £65, arguing that progress with pipeline projects was more important than cost overruns and technical problems at Rangold's active mines.

Economic data from China underpinned the wider mining sector, with industrial production from the world's third-largest economy rising at the highest pace since March 2008. In response, Xstrata took on 2.7 per cent to £10.20 and Rio Tinto was up 2.5 per cent to £31.18.

BG Group rose 1.5 per cent to 10.93½p after a push from Merrill Lynch, which anticipated near-term good news from Brazil.

Reassuring interim numbers lifted Great Portland Estates 6.8 per cent to 282½p and buoyed the property sector. Segro was up 5.8 per cent to 364¾p and Hammerson added 3.3 per cent to 437p.

Reed Elsevier led the blue-chip fallers after chief executive Ian Smith quit by mutual consent after just eight months. He was replaced by Erik Engstrom, formerly head of the group's Dutch division.

Execution, the broker, speculated about a strategic disagreement, with the board perhaps less keen than Mr Smith on "radical solutions" such as a bid for Wolters Kluwer, Informa or United Business Media . "The choice of an internal candidate also suggests that the board would not support a transformational deal, which was our best-case scenario," it said.

Reed lost 4 per cent to 465p, while Informa rose 2.4 per cent to 311¾p and UBM held steady at 480½p.

Man Group rose 3.9 per cent to 359½p after its flagship AHL fund reported its biggest weekly gain in a year.

Cadbury was steady at 763p, unmoved by news that John Paulson had raised his stake for the second time this week. The US hedge fund manager moved to 2.5 per cent with the purchase of nearly 6.4m shares.

Water utilities were in focus after Challenger Infrastructure Fund, the Australian investment group, sold its 15.6 per cent stake in Southern Water for £168m. The unnamed buyer paid a 26 per cent premium to regulatory asset base, against a UK-traded sector valued at around asset value.

United Utilities closed up 1.3 per cent at 462p and

Severn Trent gained 0.9 per cent to 974p, with both stocks aided by some gossip about bid interest.

UBS "buy" advice helped G4S take on 2.2 per cent to 251¾p, even after its chief executive and finance director sold stock for £3.5m.

Micro Focus led the mid-cap risers after a bullish trading update, jumping 20 per cent to 410½p.

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