GKN Aerospace factory visit in Filton, Bristol, 7-3-11 for the Financial Times with writer Mick Kavanagh

GKN was the London market’s main talking point on Thursday as a reheat of takeover speculation sent its shares spiking higher by nearly 10 per cent.

Unnamed Chinese companies and western engineers such as General Electric and Siemens were all pinned to the bid theory, which has been doing the rounds among day traders for at least a month.


On this topic

Bryce Elder

Analysts have been cautious, noting that any predator could be put off by GKN’s pending triennial review of its pension scheme, which was in deficit by £2.1bn at the half year.

A less speculative reason for GKN’s strength came from Numis Securities, which added the aerospace and auto parts maker to its top picks portfolio for September. The shares closed up 4.8 per cent at 325.9p, a one-year high, on about three times the daily average volume.

“In September the company is due to host an analyst presentation, which is expected to focus on the automotive-orientated Driveline business,” said Numis.

“With some concerns that the automotive cycle may be peaking in North America and potentially in Europe, the ability to calm investor nerves and outline how the business can grow in a more stagnant market should generate greater confidence and rating expansion.”

The wider market slipped for a third straight day with multinationals and dollar earners leading the fallers after the pound surged on UK manufacturing sector data.

The FTSE 100 was down 0.5 per cent, off 35.54 points to 6,745.97, as GlaxoSmithKline lost 2.4 per cent to £16.00, Diageo slid 1.2 per cent to £20.84 and Vodafone slipped 2.8 per cent to £223.4p.

Housebuilders extended a recent rally with Berkeley Group leading on a 3.9 per cent gain to £27.75 ahead of a trading update next week.

Deutsche Bank analysts were encouraged by recent reports that the government is considering a build-to-rent scheme as part of its target of 1m new homes by 2020.

Schemes to spur the private rental sector in cities are likely add more to housing demand than supply, the broker argued.

“Given the constraints of the amount of land available, we believe increased build-to-rent homes could be offset by a contraction in new-build homes for private sale,” said Deutsche.

“On this basis we see a supportive policy towards private rental sector as helpful to all those operating in London even if we don’t anticipate the companies under our coverage to build significant PRS.”

Ascential, the publisher formerly known as Emap, faded 3.8 per cent to 255p on news that pre-float backers Apax and Guardian Media Group had sold 80m shares at 250p apiece.

Diploma was up 7 per cent to 889p after the medical and engineering equipment maker said overall trading had met expectations.

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