Leading shares hit a level not seen since the dotcom boom in 1999, as UK inflation data suggested interest rates would not rise in the short term, and might even be cut.
So the FTSE 100 jumped 41.08 points to 6898.13 - a new 15 year peak - despite the continuing standoff between Greece and its creditors ahead of the country’s cash running out.
Elsewhere, specialist lender Aldermore may have dismissed suggestions it had held talks about being taken over by TSB, but City analysts believe it would have been a bad deal for the Lloyds spin-off anyway.
In a sell note on TSB, Berenberg analyst Andrew Lowe said:
This weekend saw press speculation that TSB held talks about a possible acquisition of Aldermore, a small SME-focused UK bank. While we believe that a deal could make strategic sense, its large size and capital-destructive nature suggest to us that it would not have been financially feasible.Indeed, the deal is reported to have fallen through due to disagreements over price.
If it is true that management was considering a large-scale dilutive acquisition only nine months into a five-year plan, this could raise questions on the delivery of TSB’s current strategy.
While TSB’s strategic plan is organically focused, management has always said it would consider supplementary inorganic growth at the right prices. However, discussions of a large-scale dilutive acquisition suggest to us that management may lack confidence in reaching its return on equity targets organically, especially as we are only nine months into a five-year plan.
Since the launch of TSB’s strategy and its IPO in June 2014, interest rate expectations have fallen significantly. This is likely to put significant pressure on revenues as interest rates remain lower for longer, in our view. Perhaps management is beginning to share this concern.
TSB ended 2.2p lower at 266.5p.
Consumer companies were among the risers, helped by the thought of cheaper borrowing for longer. Diageo added 46p to 1885.5p, Imperial Tobacco rose 66p to £30.63 and Unilever was 52p better at £28.01.
But as crude prices slipped again - Brent is currently down 0.57% at $61.05 a barrel - Tullow Oil fell 14.1p to 406.1p.
Royal Mail lost 10.4p to 437.6p after Morgan Stanley cut its target price from 350p to 340p with an underweight rating.
InterContinental Hotels was 43p lower at £25.45 despite a 10% rise in full year profits, with some disappointment that there was no new share buyback announcement.
