London equities start the week in the black

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Shares in London Stock Exchange jumped yesterday at the start of a busy week in the equity markets.

The Competition Commission could this week outline what conditions it will impose on a bid for the LSE from Euronext, operator of the Paris exchange.

Whether it bids is another matter. A group of Euronext shareholders are thought to view the LSE as too expensive.

Shareholder pressure scuppered an attempt by Germany’s Deutsche Börse to buy the LSE earlier this year. Lurking is Australia’s Macquarie Bank, said to be actively seeking partners to make a joint bid for the exchange. Macquarie is said to have held talks with Euronext, and been rebuffed.

“Both Euronext and Macquarie have their merits as acquirers, but I think Macquarie could pay a higher price,” said Justin Bates, analyst at Numis.

LSE would be keen to secure above £7 a share if a offer did emerge, although Mr Bates said £6.50-£6.75 was a more realistic take-out price. LSE rose 5.2 per cent to 562p.

Leading equities rose sharply as investors attempted to put October’s miserable run behind them.

Since it hit a three-year high of 5501.5 on October 3, the blue-chip FTSE 100 index had fallen 6.5 per cent before yesterday. The main index ended 65.5 points or 1.3 per cent higher at 5207.6, its best one-day performance in more than four-months. The mid-caps FTSE 250 rose 100.2 points or 1.3 per cent to 7550.3.

Volumes of 2bn were very light, with many traders preoccupied with the host of companies reporting earnings this week, starting with BP and Whitbread, the leisure group, today.

Whitbread rose 1.6 per cent to 963½p on the suggestion it would use its interims to announce some cost cutting and job losses.

Also reporting this week is Boots, off 0.2 per cent at 609½p amid rumours that the attempt to merge with Alliance UniChem, down 0.8 per cent at 759p, could be coming unstuck.

Budget airline easyJet was again in focus on hopes a leading shareholders could be planning to merge it with a low-cost rival.

Icelandair-owner FL Group, which has a 13 per cent stake in easyJet, yesterday sealed the purchase of Denmark-based Sterling Airways, Europe’s fourth-largest low-cost airline, for $229m.

Traders wondered if this was a prelude to a longer-term plan to combine the three airlines. But bid talk involving Icelandair and easyJet is nothing new and previous rumours have been played down.

When easyJet shares hit a 12-month high in August, Hannes Smarason, chairman of FL Group, played down the rising speculation by saying there was no immediate statement coming.

Others pointed out a stumbling block remained easyJet founder Stelios Haji-Ioannou, who, together with his family, holds about 40 per cent of the shares. In spite of this, easyJet ended 5.1 per cent higher to 282¾p.

Compass rebounded from Friday’s all-time low, up 2.7 per cent to 185p on reports that private-equity group Clayton, Dubilier & Rice had approached investment banks to seek advice on making a bid for the catering group.

Marconi Corporation rose 1.8 per cent to 351p amid rumours of a three-way fight for the up-for-sale telecoms equipment maker. Ericsson, the Swedish telecoms group, Alcatel of France and China’s Huawei are all said to be in the running.

SCi Entertainment, the computer games company that bought rival Eidos this year, jumped 25.4 per cent to 600p after it confirmed a bid approach.

SCi is due to join the FTSE 250 index on Friday. Electronic Arts, the producer of Harry Potter computer games, and Mortal Kombat publisher Midway Games were named as potential suitors.

Egg gained 3.4 cent to 100p on reports majority-owner Prudential was considering buying out the minority interest in the internet bank. Prudential, which reports third-quarter sales figures tomorrow, rose 1.2 per cent to 481½p.

Still with financials, Lloyds TSB continued to attract attention, amid continued talk that a US bank was eyeing a takeover. Its shares rose 2.1 per cent to 450¼p.

Wolseley, the world’s largest listed plumbing group, rose 1/4 per cent to £11.18 on the £140m purchase of Encon, a distributor of insulation materials.

Internet poker group PartyGaming rose 2.9 per cent at 88½p as brokers continued to react positively to third-quarter trading update on Friday.

Wolfson Microelectronics, the chip maker, climbed 10.2 per cent to 238p as surging demand for Ipods, Playstation Portables, personal digital assistants and other portable devices prompted the group to announce second-half revenues would be in excess of $90m, ahead of market forecasts of around $79m. The unscheduled trading statement also said operating profits would be ahead of expectations.

Analysts at Cazenove said the new guidance implied over 44 per cent year-on-year revenue growth in the second half. At the same time, the broker raised its 2005 earnings per share estimates by 19 per cent to $0.20.

Altium Securities also moved its rating from ‘hold’ to ‘buy’, but was wary that much of the performance was driven by Apple as the US electronics group accounted for 20 per cent of sales in the second half.

Egdon Resources, the energy exploration group, firmed 23.1 per cent to 66 ½p after upbeat full-year results including news that its Portland Gas Storage project had upped the target of gas it expected to store from 10bn cubic feet to 35bn cubit feet.

Gaming software developer CryptoLogic gained 10 per cent to 962½p after it said its deal with Betfair, the online gaming group, would continue until June.

PKL Holdings, the food service and healthcare facilities provider, dropped 34.6 per cent to 92½p as it warned that full-year profits would be ‘substantially’ below expectations.

Oxford Biomedica, the biotechnology group, climbed 12.7 per cent to 37¾p as it announced its seventh licence agreement for its Lentivector gene delivery technology with an unnamed Fortune 500 global biotech company.

Chorion, the brand rights owner, added 5.7 per cent to 316½p as it secured increased TV exposure for Noddy in the UK and US. Evolution Securities said UK broadcaster Channel Five’s decision to keep Noddy on air until 2012 and his appearance on Sprout, the new Comcast-HIT Entertainment channel, meant Chorion was far from going ex-growth and moved its rating to ‘buy’ from ‘add’.

Faupel, the textiles and household goods firm, jumped 62.1 per cent to 23½p after it agreed a 25p per share offer from shareholder Max Money Resources to buy the 79.9 per cent of shares it does not own.

Faupel chief executive Laurence Mead is also a director and shareholder of MMR.

Brisk trading is expected in the market debut of ING UK’s real estate investment trust on Tuesday after Cazenove raised £250m in a placing. The trust will debut at 100p per share with a market cap of £305m.

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