A FRESH burst of takeover news in the utilities sector was just the tonic the market needed to help it withstand the downward pressures from the US.

There was disappointing news from the February inflation data released during the morning which showed a higher than expected figure for underlying inflation. This came out at an annual rate of 2.9 per cent, against most expectations of 2.7 per cent.

But the news that Severn Trent, the second biggest of the British water companies, intends bidding for South West Water produced a surge of buying interest across the water sector, which analysts expect to attract more takeover activity. Wessex Water said at the start of this month that it intended to bid for South West and a full-scale battle now seems in prospect.

The sizeable gains in the water issues were the driving force behind the latest powerful performance by the FTSE Mid-250 index, which hit an all-time high, in consecutive sessions.

A long list of company results provided plenty of interest, with Guinness an early casualty. The drinks group was the Footsie's second-worst performer after rather uninspiring preliminary figures and a cautious statement on current year prospects, which more than offset news of a possible special dividend or share buyback.