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BP deal helps stabilise FTSE; miners, banks weigh

Published 01/17/2011, 04:34 AM
Updated 01/17/2011, 04:36 AM

* FTSE flat, U.S. markets closed for holiday

* BP rises on Rosneft deal

* Smiths jumps as it rejects $3.9 bln bid

By David Brett

LONDON, Jan 17 (Reuters) - Britain's top share index was little changed on Monday, supported by BP's tie-up with Russia's largest oil producer, Rosneft, which offset weaker mining stocks.

BP added most points to the index after it agreed a share swap with Rosneft late on Friday that will give the UK company access to areas of the Arctic previously reserved for Russian oil companies.

The top gainer in percentage terms was British engineering firm Smiths.

Smiths rose 11.2 percent after rebuffing a 2.45 billion pound ($3.88 billion) cash bid approach for its medical services unit late on Friday, which a person familiar with the matter said came from buyout firm Apax.

"We're hearing that Apax have made a bid and that other people are in the background, so the price could be pushed higher," a London-based trader in the stock said.

By 0856 GMT, the FTSE 100 was up 0.67 points at 6,002.74, having closed down 0.4 percent in the previous session as the index ebbed away from its 31-month closing high on Wednesday.

BP, which rose 1.6 percent and added more than 6 points to London's blue chip index, on Monday said it will swap 5 percent of its shares, valued at $7.8 billion, for 9.5 percent of Rosneft, Russia's top oil producer.

The deal helped lift sentiment in the energy sector.

British artificial knee and hip maker Smith & Nephew jumped 5.3 percent after a weekend report that Johnson & Johnson was considering a fresh takeover approach worth at least 800 pence a share, which would value Europe's leading replacement joint company at 7.12 billion pounds ($11.3 billion).

DATA LIGHT

With little corporate or economic data to guide investors, and with the United States markets closed on Monday for the Martin Luther King Jr Holiday, analysts expected Britain's FTSE 100 to stagnate during the session.

"There's not many new themes. The market's move is a reflection of the fact there is very little in the diary, so we do see the FTSE treading water today," Richard Hunter, head of UK equities at Hargreaves Lansdown, said.

Miners remained hamstrung by concerns over demand from China, after the world's biggest consumer of raw materials announced it was raising banks' required reserves by another 50 basis points on Friday, a further sign of monetary policy tightening.

"China is the powerhouse of demand and the economic situation there is attracting a lot of attention, even though its situation is one that most other countries would give an arm and a leg for," Hunter said.

Investors locked in profits on banks, which have enjoyed a good start to 2011 despite Europe's sovereign debt problems lingering in the background.

(Editing by Erica Billingham)

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