THE return of bid activity gave a lift to the London stock market and helped to keep investor interest alive on what might otherwise have been a difficult beginning to the holiday shortened trading week.
With the school half term holidays adding to the temptations of an extra long weekend, volume was light, with only 517 million shares traded by the 6 p.m. count.
The effect of stocks going ex-dividend knocked around 2.5 points off the FTSE 100 index and equities received no help from gilts, which were broadly unchanged ahead of today's £3 billion sterling long dated auction. In addition, the political background remained shaky, with further weekend press stories of splits in the Conservative party over European policy.
Much of the impetus behind the market came, therefore, from Scottish Power's £1.52 billion bid for Southern Water and the potential of a rival offer emerging from Southern Electric.
Shares were lifted across the utilities sector, as traders sought out other plausible takeover candidates. The sector provided four of the top five performers in the FTSE 100 index and the best four shares in the FTSE Mid-250 index.
Even so, takeover fever took its time to infect the overall market and the Footsie opened the day only 2.9 points ahead. The leading index gradually edged higher during the morning and reached its peak of 3,770.6, up 18.5, after Wall Street initially traded higher.
A turnaround in the US market, which saw the Dow Jones Industrial Average around 45 points lower when the London market closed, took the shine off the Footsie, which ended only 8.1 points ahead at 3,760.2. The Mid-250 index managed a 14.4 gain at 4,504.4.
Mr Mark Brown, head of strategy and economics at ABN Amro Hoare Govett, argued that yesterday's market developments were "the last throes of the takeover boom, generated by the political timetable". He has a long standing end year forecast of 3,500 for the Footsie, although he said there is a danger that the index might fall to 3,300.
Mr Michael Hughes, global strategist at Barclays de Zoete Wedd, is sanguine. With the market at current levels, he sees little to worry about, given that institutional liquidity is strong, valuations are not extreme and the recent results season was on the high side of expectations.
The value of retail business on Friday was £1.73 billion, its lowest level for more than a week.
