A whiff of takeover speculation added spice to what might otherwise have been a tranquil session, with many European markets closed. Talk that Cisco Systems, the US technology company, might be interested in bidding for the telecoms equipment group Marconi prompted that company's stock to be the best performer in the FTSE 100 index with a gain of 6.7 per cent.
Technology shares in general were lifted by the rumours with Logica and Misys also gaining ground. That offset the latest profit warning from the US, where Cypress Semiconductor said that business conditions had not improved in the second quarter.
Many European markets were closed for Whit Monday, although Frankfurt, which was open, managed to gain ground. Turnover was modest, given the circumstances, with just 1.7 billion shares traded by the 6 p.m. count. More than a quarter of that came from Vodafone.
Markets should be busy over the rest of the week, with the FTSE index changes, a Bank of England monetary policy committee meeting and a general election all due.
All the main FTSE indices gained ground yesterday. The Techmark 100 index of leading technology stocks advanced 27.34 to 2,047.44.
The bad news came in the form of a profits warning from NSB Retail Systems, the retail software specialist while Regus, the property group, saw its shares fall on news that it was in talks to buy Frontline Capital of the US.
With the FTSE 100 having gone backwards so far this year, strategists have been putting forward recommendations in an attempt to help investors outperform a moribund market.
Gerard Lane, UK strategist at UBS Warburg, says the group has shifted its sector strategy after the strong performance of defensive sectors so far this year. "We think that the defensive outperformance has come to an end and we moved underweight defensives last week. We believe that cyclicals will outperform as recent monetary easing improves global economic and earnings growth prospects."
Robert Buckland, UK strategist at Schroder Salomon Smith Barney, has addressed the subject of TMT (technology, media and telecom) stocks. "For international investors, the UK remains an expensive place to buy TMT stocks," he says.
But for UK investors, Buckland thinks there is a case of moving back into the sectors. "Although the outlook is grim right now, we believe that an improving macro background and the potential for, first, a stabilisation in company fundamentals and second, a recovery over the next 12 months, means there should be good returns to be made from many TMT stocks."
