Market report: Arm rises on momentum hopes

The good news from the East did boost mining shares, however, with BHP Billiton rising 36½p to £19.38, Rio Tinto gaining 49½p to £31.27 and Antofagasta finishing 8½ better at 779p.

In the FTSE 250, Lonmin jumped 11.2 to 259.6p after the damaging five-month strike in South Africa’s platinum belt finally came to an end.

Fellow mid-capper Vedanta Resources climbed 44p to £11.61, helped by Bank of America Merrill Lynch analysts, who repeated their “buy” advice on the India-focused miner. Regulatory changes in India could make it easier for Vedanta to buy the government’s 29.5pc stake in Hindustan Zinc, the experts said. If the FTSE 250 company is successful in buying out minority shareholders, the group could “upstream” cash through bigger dividends from the subsidiary.

Takeover excitement was another major factor in Monday’s market. Kentz, the oil and gas services company which last summer spurned approached from Amec and Germany’s M+W, surged 226½p to 929p after agreeing to a takeover by Canada’s SNC-Lavalin.

The cash offer values Kentz at £1.2bn, or 935p a share, and news of the deal inevitably spurred interest in London’s other oil services firms. Lamprell firmed 4 to 151¼p, Cape advanced 10 to 298p and John Wood Group finished 1½ dearer at 809p.

InterContinental Hotels advanced 63p to £23.68 after a weekend report that it was Ramada-owner Wyndham Worldwide which recently made an unsuccessful £6bn approach for the FTSE 100 company.

Meanwhile, BG Group, which has attracted plenty of deal speculation of late, rose 31p to £12.70½ after Deutsche Bank analysts urged management to demerge the company’s liquefied natural gas business from its exploration and production operations. Such a split would create “two smaller but focused businesses”, they argued.

“Now seems an appropriate time for management to revisit whether BG Group, as it is structured today, maximises value for shareholders,” the Deutsche analysts told clients.

“Separating the business groups we see two focused and appealing companies each possessing critical mass and each well positioned within its industry.”

Renewed concern about a rise in interest rates weighed on housebuilders: Barratt Developments dropped 5.8 to 350.8p and Persimmon was down 14p at £12.16.

Bank of England policymaker David Miles proved a drag on the sector after writing in The Daily Telegraph that rates should go up in coming months. There was also concern that the central bank’s Financial Policy Committee would later this week unveil measures to limit risky mortgage lending.

Foxtons, the London-focused estate agency, fell 11.9 to 268p after broker Goldman Sachs started its coverage of the shares with a “neutral” rating. However, the American bank was more positive on kitchen supplier Howden Joinery and told clients to “buy” the shares in the wake of their recent price weakness. Howden gained 6½ to 296.7p.

Airlines remained under pressure amid worries that the rising oil price – driven by the violence in Iraq – will push up fuel costs.

Low-cost airline easyJet slid 29p to £14.23 and International Airlines Group, the owner of British Airways and Iberia, slipped 4.7 to 379.9p. The cancellation of flights because of a strike by French air traffic controllers also dented sentiment towards the airlines.

Elsewhere among the fallers, Verona Pharma stood out with a drop of 32.5pc, or 0.675 to 1.4p, after disclosing that its VRP700 drug, to treat coughs in patients with idiopathic pulmonary fibrosis had proved ineffective in a clinical trial.

As a result, the Aim-listed company said it was halting in-house development of the treatment and would look for ways to “realise further value from this asset”.

Staying with the smaller companies, stockbroker Cenkos surged 6.6pc, a jump of 13½ to 217p, after announcing that revenues and pre-tax profits in the first six months of this year would be higher than those recorded during the whole of last year.

WH Ireland, another broker, pleased with an encouraging trading update and rose 4½ to 113½p.

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