GKN advances as FTSE heads for quarterly gain

Shares in GKN (GKN.L) advanced on Friday as broker Jefferies talked up a potential acquisition by the car and plane parts firm of Volvo’s aircraft business, while Britain’s FTSE 100 was set to post a second straight quarterly gain.

GKN took on 4.5p, or 2%, to 206.9p in early trading, after losing 7.5% in the past month amid fears that the Redditch-based group would need to raise additional funds in order to finance the deal.

‘With hindsight, we ought to have recognised the mere suggestion of an equity issue could create scope for some anxiety or some technical weakness in the GKN share price,’ said analysts at Jefferies in a research note.

‘While it is not clear that GKN will formally seek to acquire Volvo Aero, any transaction might well stand on its merits, in our view. Indeed, we doubt GKN would proceed unless any deal were clearly attractive for shareholders.’

Eurozone rescue funds

Meanwhile, the FTSE 100 gained 0.3%, or 17 points, to 5,759 and the All Share index increased 0.35%, or 11 points, to 2,998. See the FTSE’s performance and the index’s top winners and losers.

Should the FTSE 100 close at this level, it would post a gain of 3.4% on the quarter.

The gains came as eurozone finance ministers were expected to agree temporarily to almost double their regional rescue funds in a bid to resolve the sovereign debt crisis that has dogged the monetary union for two years.

‘Combined with assistance from the International Monetary Fund, [the funds] will probably be large enough to also offer shelter to Spain and Italy if necessary,’ said Christoph Weil, economist at Commerzbank.

But referring to the paper of the eurozone’s faltering economies, of which Spain and Italy are the largest, he added: ‘Nonetheless, there is reason to fear that investors will remain sceptical and continue to demand high risk premiums for peripheral bonds.’

Nonetheless, the yield – or implied interest rate – on Spanish and Italian benchmark government bonds retreated, and the euro gained 0.2% versus the dollar to $1.332.

Stock markets in Europe also improved: Germany’s DAX index added 0.67% to 6,921, France's CAC 40 index strengthened 0.83% to 3,409, and the FTSEurofirst 300 index of top European shares was 0.45% to 1,064.

Solid results from LSE

Engineers dominated the leader board on the FTSE 100, as fears over the outlook for global exports eased. Weir Group (WEIR.L) added 49p to £17.50 and IMI (IMI.L) hardened 21p to 970p.