Markets: International Power deal fuels rally

BRITAIN’S leading shares index staged a modest recovery yesterday as utilities firms gained from the valuation placed on International Power by French buyer GDF Suez.

The FTSE 100 index gave backsome of its gains late in the session to close 14.5 points higher at 5,666.3.

Angus Campbell, head of market analysis at Capital Spreads, said: “The week has got off to a good start as investors tentatively picked up stocks that had been heavily sold off recently.”

He added that the bargain hunting was also assisted by strong US retail sales figures.

GDF bought the 30 per cent of International that it did not already own in a deal that values the British power stations company at £22.8 billion.

The buy-out price gave a lift to other power firms, with SSE up 18p at 1,358p and Centrica 5.1p higher at 318.8p.

Other risers included fashion group Burberry, which climbed 21p to 1,586p on expectations that it will report strong sales figures when it posts an update for the second half of its financial year today.

But investors dumped financial stocks as borrowing costs in Spain moved past 6 per cent and closer to the unsustainable levels that forced Greece, Portugal and Ireland to seek an EU bailout. A downgrade of the entire European banking sector by broker JPMorgan Cazenove to “neutral” from “overweight” added to the eurozone fears to ensure a poor day for the banks.

Lloyds was down 3.4 per cent or just over 1p at 29.7p and Royal Bank of Scotland fell 0.8p or 3.1 per cent to 24.3p, while Barclays dropped 4.1p to 210.8p, even though a note from Investec Securities reinforced its “buy” rating on the stock.

Other fallers included insurer Aviva, which dropped 7.4p to 298.3p, and hedge fund Man Group, 4.9p lower at 105.1p.