Vodafone rally helps Britain's FTSE to rebound

Thu Aug 29, 2013 3:55am EDT

* FTSE 100 up 0.6 pct after falling for 2 days

* Vodafone surges on M&A news, telecom sector up

* WPP up on strong numbers, second-biggest gainer

By Atul Prakash

LONDON, Aug 29 (Reuters) - Vodafone shares lifted Britain's top stock index on Thursday after the company confirmed it was in talks with Verizon Communications for possible disposal of its 45 percent stake in a joint venture.

Vodafone was 8.9 percent higher after hitting a 12-year high on the news.

A surge in Vodafone, which added most points to the FTSE 100 index, helped telecoms shares top the sectoral gainers' list. Analysts said the sector's outlook remained positive and there could be more M&A activities, albeit at a smaller scale.

"The sector looks good because going into 2014 revenues could start to pick up, capacity could tighten and demand could be quite good if consumer spending comes back, which looks like it is," Daniel McCormack, strategist at Macquarie, said.

"The near-, medium- and long-term outlook for equities is excellent. In the near-term you are going to see earnings downgrade fade in intensity and the macro numbers keep improving. Valuations are still good."

At 0744 GMT, the blue-chip FTSE 100 index was 37.69 points, or 0.6 percent, higher at 6,467.75 points after falling 0.2 percent in the previous session and 0.8 percent on Tuesday.

The market was also supported by indications that a military strike against Syria in response to recent chemical weapons attack could be delayed after U.S. President Barack Obama faced new obstacles with British allies and U.S. lawmakers.

Among other sharp movers, WPP rose 3.5 percent, the second-biggest gainer on the FTSE 100, after the world's biggest advertising agency improved its outlook for the full-year and reported a 5 percent rise in like-for-like revenues in July, its strongest monthly rate this year.

"The benefits of diversification are exemplified by today's numbers," Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said.

"Overall key metrics remain strong, the dividend policy progressive and the full year outlook sales numbers have been increased. The market view of WPP as a strong buy is likely to be maintained." (Editing by Jeremy Gaunt.)