FTSE climbs on bargain hunting

The FTSE 100 closed higher on Friday after buyers emerged, eager to find bargains after some heavy losses over the week.

The FTSE 100 was up 59.9 points, or 1.1 per cent, to 5,784.0, having been earlier more than 80-points higher. The mid-cap FTSE 250 was up 0.4 per cent at 9,807.5.

Miners, which have lost in recent sessions on fears demand will be damped by a slowing economy, were back in the M&A spotlight.

Xstrata raised its cash offer for Resource Pacific, the Australian coal producer, by 12 per cent to A$3.20 a share, valuing the company at A$1.08bn.

However, the Switzerland-based miner remained a target itself after Brazil's state owned bank BNDES suggested any bid from local mining group Vale would face no domestic regulatory problems. Xstrata shares climbed 1.5 per cent to £38.76.

Meanwhile, reports that China's state-owned aluminium smelter Chinalco was seeking regulatory approval from Australia before increasing its stake in Rio Tinto, cast further doubt on the BHP Billiton (NYSE:BHP) bid.

BHP offered 3.4 of its shares for every Rio share this week, valuing Rio at around $147bn. The board at Rio Tinto rejected the offer. BHP shares were up 2.2 per cent to £15.01, while Rio climbed 2.1 per cent to £53.32.

Anglo American rose 3.5 per cent to £29.80 after De Beers said its contribution to Anglo's underlying earnings rose 5.6 per cent to $239m in 2007. Anglo holds a 45 per cent stake in the world's largest diamond producer.

Antofagasta rose 6.3 per cent to 721¾p and Kazakhmys climbed 5 per cent to £12.37.

Compass Group, the world's biggest contract caterer, gained 4.1 per cent to 326½p after first-quarter operating profit came in ahead of expectations. The company said it was offsetting food price inflation through cost cutting and higher pricing.

GlaxoSmithKline extended its losses following the drugmaker's profit warning on Thursday. The company highlighted the challenges it faced from manufacturers of cheap, generic drugs. The stock shed a further 0.7 per cent to £10.70.

Similar concerns across the pharmaceuticals sector drove AstraZeneca 1.6 per cent lower to £19.47, and Shire down 1.9 per cent to 937½p.

Biffa, the waste collection service, topped the FTSE 250 with an 12.7 per cent rise to 369½p after it agreed a £1.2bn offer from a consortium of private equity companies.

Montagu Funds, Global Infrastructure Partners and UCIL jointly offered 350p a share, Biffa added that a third party was conducting due dilligence and might put in a rival bid.

Premier Foods, however, was at the bottom of the pile on the mid-cap index - down 9.4 per cent to 108¾p - on concerns over the company's level of debt.

Darren Shirley and Clive Black at Shore Capital said the company was not in a comfortable cash position. "Premier does not have the rating to easily or attractively raise equity to deleverage its balance sheet, while we believe the debt and pension deficits are a deterrent to trade or private equity interest," the analysts added.