LONDON (Reuters) - The FTSE 100 index .FTSE ended 1.1 percent higher on Tuesday as Italian group Eni's (ENI.MI) bid for Burren Energy BUR.L lifted oil shares and Northern Rock NRK.L led gainers on the back of new funding agreements.
The FTSE 100 closed up 74.5 points, or 1.14 percent, at 6,615.4 — the largest one-day percentage gain since September 19, the day after the U.S. Federal Reserve cut interest rates by 50 basis points to ward off a slowdown in the economy.
European shares also finished higher on Tuesday.
“There had been concerns overnight coming out of the U.S. that the weak housing sector might feed through to a lower demand for energy. But you have the news today of Eni and Burren Energy, which gives a fillip to the sector,” said Richard Hunter, head of UK equities at Hargreaves Lansdown.
Oil shares were the standout gainers, adding nearly 24 points to the index rise, after Eni said it had made a 1.48 billion pound takeover proposal to Burren Energy, which the London-based firm rejected.
Burren leapt 28 percent. Elsewhere, Tullow Oil (TLW.L) climbed 2.6 percent, Royal Dutch Shell (RDSa.L) put on 2.2 percent, Cairn Energy (CNE.L) gained 2 percent and gas producer BG Group BG.L rose 3 percent.
BP (BP.L), which had been hit by recent speculation that its third-quarter results would be disappointing, climbed almost 2 percent.
Miners were among other top sectoral gainers. Vedanta Resources VED.L, which is due to issue a trading statement on Wednesday, tacked on 3.3 percent. BHP Billiton BLT.L, Rio Tinto (RIO.L), Xstrata XTA.L and Anglo American (AAL.L) advanced more than 1.6 percent.
British Land (BLND.L) rose 5 percent on talk of a Saudi fund building a stake in the property company, traders said. The company declined to comment.
In other M&A-related moves, SABMiller SAB.L added 1.4 percent after it and Molson Coors Brewing (TAP.N) agreed to combine their U.S. operations to create a venture with annual sales of $6.6 billion (3.3 billion pounds) that will be a strong number-two player to Anheuser-Busch (BUD.N).
Northern Rock, the country’s biggest casualty of the global credit squeeze, jumped nearly 20 percent after the government made a fresh attempt to shore up the mortgage lender, offering to guarantee new retail deposits and extend funding agreements.
The Financial Times also said U.S. buy-out firm Lone Star has joined the growing list of potential bidders for the troubled Newcastle-based lender.
RBS fell 0.5 percent. Separately, the bank agreed to sell water company Southern Water to JPMorgan (JPM.N) for about 1.3 billion pounds.
Water companies Severn Trent (SVT.L) and Kelda Group KEL.L gained 2.3 and 4.1 percent, respectively.
Housebuilders were down after UBS downgraded the European construction and building materials sector to “neutral” from “overweight”, saying they faced a “strong headwind” after the slowdown in the U.S. housing market and UK house price trends.
Persimmon (PSN.L) shed 2.4 percent and Barratt Developments (BDEV.L) dipped 2.1 percent, while building products distributor Wolseley WOS.L fell 2.1 percent after market sources said Citigroup had placed 9 million shares in the company at 837 pence each.
Additional reporting by Michael Taylor and Anshuman Daga