FTSE rises as M&A, US plan buoy financials; ITV up

Mon Jul 14, 2008 7:06am EDT

* FTSE 100 up 1.8 percent, bounces fron near 3-year low

* M&A, plan to shore up U.S. mortgage firms boost financials

* Broadcaster ITV up on Endemol bid speculation

By Michael Taylor

LONDON, July 14 (Reuters) - The FTSE 100 .FTSE rose 1.8 percent on Monday as a combination of a U.S. plan to rescue mortgage finance firms and merger and acquisition (M&A) activity buoyed financials, while broadcaster ITV led individual gainers.

At 1054 GMT the UK's blue-chip index gained 95.32 points to 5,356.9, after falling 2.7 percent on Friday to its lowest closing level in nearly three years.

Beaten-down banks and financials rose after the U.S. Treasury and Federal Reserve announced a plan on Sunday evening which called for sweeping measures to lend money and buy equity, if necessary, in Freddie Mac and Fannie Mae.

Alliance & Leicester soared nearly 50 percent after Spain's Santander said it had reached a takeover deal with the British bank.

Peers that benefited from the positive sentiment included Standard Chartered , Bradford & Bingley , Barclays , Lloyds TSB and HBOS , which were all up between 2.6 and 13.7 percent.

But the FTSE 100 has fallen more than 17 percent this year and many market participants doubted the sustainability of any upturn.

"We saw this last week. It's too early to call any sort of recovery," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers. "It's almost a mini-relief rally, as much as the Fed doing what they can to help Fannie and Freddie so to speak."

"Certainly in terms of the UK and Europe, there are still concerns on the banking front on whether there are more credit writedowns to come," he added.

TOP GAINER

ITV climbed 14.9 percent to top the FTSE 100 leaderboard after the Financial Times quoted the co-founder of producer Endemol as saying a combination of the two companies "could make sense, depending on the numbers".

ITV Executive Chairman Michael Grade has been approached by "interested parties" over the possible sale of BSkyB's stake in the British free-to-air broadcaster, a source familiar with the matter also told Reuters.

Among other individual shares, Rexam gained 7.2 percent to feature among leading FTSE 100 advancers, after Goldman Sachs raised its rating to "buy" from "neutral" and added the world's biggest drinks can maker to its pan-Europe buy list.

Further on the upside, shares in Diageo and SABMiller rose between 1.9 and 2.5 percent after U.S. brewer Anheuser-Busch accepted a sweetened $52 billion takeover bid from Belgium-based InBev to create the world's largest beer maker.

With U.S. crude CLc1 drifting away from record-levels at below $144 a barrel, Shell slipped 0.7 percent.

Russia-focused oil company Imperial Energy jumped 20.1 percent, however, after saying it had received a bid approach from a party it did not name but which industry sources identified as Indian state-controlled ONGC.

Among the few FTSE 100 decliners, Reed Elsevier dipped 0.9 percent as Deutsche Bank cut its target on the Anglo-Dutch publisher to "hold" from "buy".

Dealers kept a close watch on the British share index.

"The UK's FTSE 100 managed to rebound twice in the last two weeks at 5,370," said David Scott, senior stockbroker at Redmayne-Bentley Stockbrokers.

"If the commodity stocks, which have helped support the FTSE 100 over recent times do head sharply southwards, then this will almost certainly breach this support level ... Worryingly the market closed below this level on Friday but managed to climb back above it this morning -- 5,000 looks to be the next target." (Additional reporting by Dominic Lau; Editing by David Holmes)