BT a winner as tough talk on pension deficit cheers

BT raced up the FTSE 100 winner's board today on talk that it is planning an all-out attack on its pensions deficit by issuing a multi-billion-pound bond.

At its three-yearly pension review in May, BT is tipped to say that the deficit has risen to around £11 billion, up from £3.4 billion in 2005.

BT would be following in the footsteps of peers Deutsche Telecom and Swisscom, who have both turned to bonds in the last month, which have proved very popular with investors.

BT's shares which gained 6.9p to 90.6p and are the fourth-worst performer on the FTSE 100 this year, also got a boost from expectations that the pensions regulator will allow companies to renegotiate pension deficit recovery plans.

Shares in London looked set for a strong finish to the week. After sinking into the red in early trading, the top flight got a boost from Citigroup and General Electric's better-than-expected numbers, rising 55.73 points to 4108.71.

Traders said that there was evidence of sector switching, with investors dumping the defensive tobacco and pharmaceuticals stocks for more risky punts such as banks.

Financial stocks largely extended yesterday's rally. Lloyds Banking Group shot up 14.3p to 104p despite broker advice to take profits and rival Barclays was 201/2p stronger at 2321/2p. Royal Bank of Scotland was 4p dearer at 32.6p on the back of yesterday's sale of its stake in the Spanish unit of Direct Line Insurance to Bankinter. RBS pocketed 426 million (£376 million) from the move. Some of the part-nationalised bank's Malaysian operations are also reportedly going under the hammer.

HSBC marked time at 488p after the banking giant said it will speed up its Chinese expansion. It plans to increase the number of its outlets in the Asian nation and is weighing up a move into new business areas through ventures with local partners.

Set-top box maker Pace jumped 111/2p to 1511/2p after Dutch electronics giant Philips sold its 17% stake. The gains were attributed to relief that a potential overhang has been cleared and the possibility that Pace might now be a takeover target. A rumour that BSkyB had snapped up some of the stock was dismissed by sector experts who noted that, thanks to the satellite broadcaster's acquisition of Amstrad, competition issues would arise.

BP's board might have come under attack from shareholders yesterday but the titan of oil still has some fans and stockbroker JPMorgan Cazenove today listed five reasons to buy.