UPDATE 1-UK FTSE rises as data, Shire deal underpin optimism

Mon Nov 11, 2013 11:50am EST

* FTSE 100 ends up 0.3 pct at 6,728.37 pts

* Shire's ViroPharma deal seen marking renewed optimism

* BT rebounds as investors cheer football rights deal

* Broader market supported by global economic improvement (Updates prices at settle)

By Francesco Canepa

LONDON, Nov 11 (Reuters) - Britain's FTSE 100 rose on Monday, boosted by signs of a strengthening global economy and major deals for pharma group Shire and telecoms group BT.

Shire rose to an all-time high after beating competitors to buy ViroPharma, in a $4.2 billion deal implying a 64 percent premium to the stock price of the U.S. rare diseases specialist, compared with before the bid speculation started in September.

The hefty premium was seen as further evidence of a more bullish attitude by global firms, such as Verizon's buyout of Vodafone from their U.S. joint venture and Twitter's initial public offering.

"Companies are looking at major acquisitions or initial public offerings because the market is right where they can generate some decent amount of money," Danny Cox, head of financial planning at Hargreaves Lansdown, said.

"There's the potential for some sort of Santa Rally as people feel a bit more confident," Cox added referring to a FTSE surge in the run up to Christmas.

He believes the FTSE could head towards its all-time highs at 6,950 although he cautioned this level was unlikely to be reached this side of New Year.

The FTSE 100 closed up 19.95 points, or 0.3 percent higher, at 6,728.37 points, inching closer to a five-month high of 6,819 hit last week.

The FTSE was extending an upward move started on Friday, when much better-than-expected jobs data fuelled expectations the world's largest economy was picking up the pace.

Since then Chinese data has shown stronger than expected growth in factory output and solid growth in retail sales in the world's second biggest economy.

General financial stocks, which are heavily exposed to the health of global markets, rose 1.7 percent, with asset managers Schroders and Aberdeen Asset Management up 4.3 percent and 3.4 percent, respectively.

Yet some investors remained worried that the better U.S. data would bring forward the time when the Federal Reserve starts trimming its asset-purchase programme, which has driven investors into equities in the past year.

The FTSE has rallied nearly 20 percent since this round of quantitative easing (QE) was announced in September 2012. The Fed is expected to start reducing bond purchases in early 2014.

The rally has defied falling earnings estimates, leaving the FTSE trading at 12.5 times its expected earnings for the next 12 months, its highest valuation multiples since early 2010, Datastream data showed.

"The focus is going to be firmly on the U.S. QE tapering and the market is going to struggle to rally with that uncertainty," said Trevor Green, head of institutional equities at Aviva Investors, who manages assets worth 2.5 billion pounds.

Green has started on take profit on some of his most successful holdings such as airline easyJet, which has rallied nearly 60 percent this year.

BT BEATS SKY

BT helped the FTSE rise after it beat dominant pay-TV operator BSkyB to Champions League football rights in a 900 million pounds ($1.4 billion) deal.

Shares in BSkyB fell 10.9 percent in their worst daily performance since 2008, in volume nearly six times the average after the group's first major defeat in a rights auction.

BT's stock rose 0.5 percent to 372 pence, after trading as low as 362 pence in early deals as investors fretted about the price paid for the rights. Most analysts' reactions to the deal, however, have been positive for BT. [ID:nWLB005O4

"BT have come out with this deal today and, even by doing this, managed to keep their existing guidance so that's positive," said Green of Aviva, who owns BT shares in one of his funds.

"It could be up to three years before one can say definitely the price they paid was justified. It's what we expected and we're comfortable with it."

Curbing gains on the FTSE was insurer RSA, which slumped 10.5 percent in volume nearly ten times the average after it suspended three senior executives at its Irish unit and commissioned a review of its reporting processes and controls. . (Additional reporting by Toni Vorobyova; Editing by Ruth Pitchford)

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