Wolseley, the plumbing and building materials group, was in focus on Tuesday as its shares rallied from recent lows.
Since peaking at a record £14.62 in March, Wolseley has been among the worst performers in the FTSE 100.
A slowdown in the North American housing market, which is key for Wolseley, has seen its shares lose a quarter of their value. They hit their lowest level since May 2005 earlier this month, but were in demand yesterday, posting one of the biggest gains in the FTSE 100.
Although there was talk of stake building and that Wolseley’s lowly rating – its shares trade on 10 times prospective earnings – could leave it vulnerable to a bid from Home Depot, City traders attributed the rise to the clearance of a stock overhang and results from Irish rival CRH.
In spite of the US housing slowdown, CRH was able to deliver a 37 per cent rise in half-year figures and more importantly issue an upbeat outlook statement. It said stronger US-non residential and infrastructure demand would offset any further weakness in housing.
Hopes that Wolseley will be able to make similar comments when it announces full-year results on September 25 saw its shares close 2.2 per cent higher at £10.89.
In the wider market, leading shares started brightly but faded later. A combination of weaker-than-expected US consumer confidence figures and a poor performances from the heavyweight oil sector, as Brent crude futures dropped below $70 a barrel, were to blame.
The FTSE 100 closed up just 9.7 points, or 0.17 per cent, at 5,888.3 after having hit 5,921.3 in mid-morning trade. The FTSE 250 gained 40.2 points, or 0.4 per cent, to 9,531.8.
Market turnover improved, reaching 2.2bn shares as traders and fund managers started to return from their summer holidays.
Of course, the falling oil price was not bad news for everybody. Transport stocks had a good day. British Airways climbed 4 per cent to a four-and-half year high of 414¼p while EasyJet rose 4.5 per cent to 454½p and Carnival, the cruise ship operator, gained 2.6 per cent to £21.74. Elsewhere, BAE Systems moved up 2.9 per cent to 373½p, excited by reports that Russian state bank Vneshtorgbank had spent about $1bn (£520m) buying a near 5 per cent stake in EADS, the defence contractor and Airbus planemaker.
The Russian stake building rumours come as BAE Systems considers whether to sell its 20 per cent stake in Airbus to EADS.
Drax, which operates Europe’s largest coal-fired power station, gave up 1.8 per cent to finish at 902p as Morgan Stanley placed 10m shares at 900p for an institutional client.
Brewer SABMiller, up 0.6 per cent to £10.13, was a talking point amid reports that it is weighing up a bid for Australia’s Fosters. Analysts said a move was unlikely and Diageo, which reports full-year figures on Thursday was a more logical bidder.“Diageo’s strong market share in Australia would lead to strong synergies . . . and the Foster’s wine brands could be channelled through Diageo’s global distribution network,” Dresdner Kleinwort said in a note to clients. Diageo firmed up 0.1 per cent to 945p.
Away from the blue chips, Signet dropped 7.8 per cent to 106¼p after Apax Partners and Kohlberg Kravis Roberts confirmed they were no longer interested in bidding for the jeweller, while MFI Furniture Group slipped 4.2 per cent to 85p in the wake of reports that claimed the sale of its loss-making UK retail business to Merchant Equity Partners had hit a snag.
Ashtead, the industrial plant hire company, gained 3.7 per cent to 132½p after unveiling a higher-than-expected take-up – 96.2 per cent – for its £150m rights issue, which is being used to help finance its acquisition of US rival NationsRent. The “rump” of the rights issue – 5.7m shares – was quickly placed by UBS and JPMorgan Cazenove at 131¼p.
Bid rumours continued to swirl around aerospace and defence group Cobham, up 2.6 per cent to 175 ½p. Merrill Lynch said it was possible that a financial buyer might be interested in the company given its low gearing and predictable cash generation.
The stock was also boosted by a Deutsche Bank “buy” recommendation. Analyst Ben Fidler believes Cobham, which trades on 14 times prospective earnings, is cheap, and that half-year figures, due September 12, should impress.
Babcock International gained 1.3 per cent to 338¾p on renewed bid rumour rumours.