Footsie makes small gains as Burberry stocks advance on deal speculation

FTSE: 5,864.65 (+1.49) Mid-250: 12,008.79 (+11.86) Small Cap: 3,285.56 (+10.46)LONDON MARKETS were a little higher in morning trade yesterday as bid speculation trumped growth concerns after a disappointing UK retail sales survey.

Burberry, a fashion retailer, was the biggest gainer in early trade after the company was boosted by reports in France that luxury goods group PPR was in talks to make a large acquisition.

“The news is helping to entice speculative traders into the luxury goods sector today, giving lift to Burberry’s share price,” said Joshua Raymond at City Index.

Shares in the UK company rose 0.4 per cent to £13.12.

Gains for Burberry were still impressive, however, given the session’s weak retail sales data. Low wage growth and high inflation forced consumers to ease their spending in May after a strong Easter and royal wedding weekend, the British Retail Consortium said.

“The May BRC survey indicates that consumers have quickly put their hands back in their pockets after being encouraged to temporarily loosen their purse strings in April by a particularly favourable combination of factors,” said Howard Archer at IHS Global Insight.

The FTSE 100 closed up 1.49 points at 5,864.65.

Resolution, an insurance group, advanced 2.6 per cent to 307.55p after announcing a £500 million cash return to shareholders. The company, that specialises in acquiring and merging life insurers, said it would begin with an immediate £250 million share buy-back, followed by another similar-sized cash return in the first half of 2012.

“We remain a buyer of the stock as it is cheap in relation to the embedded value, and action it is taking should see it re-rated higher,” said Marcus Barnard at Oriel Securities.

Hopes that any spare cash at other insurance groups may find its way back into shareholders’ wallets boosted the sector. Legal General added 1.8 per cent to 115.6p, while Standard Life gained 1.3 per cent to 206.2p.

BP edged 0.2 per cent lower to 450.16p after it was reported the company was preparing to sell half of its 50 per cent holding in its joint venture with Russia’s third-biggest oil producer TNK to state-controlled Rosneft.

Weir climbed 1.5 per cent to £20 after JPMorgan lifted its target price on the stock to £21.50 from £21. – (Copyright The Financial Times Limited 2011)