The Old Economy’s return to favour is set to become official today with brewing construction

The Old Economy’s return to favour is set to become official today with brewing, construction and logistics groups expected to end the brief sojourn in the FTSE 100 of four of the index’s highest-profile new economy stocks. The quarterly index reclassification also sees the departure of several internet floats from the FTSE 250. The Old Economy’s return to favour is set to become official today with brewing, construction and logistics groups expected to end the brief sojourn in the FTSE 100 of four of the index’s highest-profile new economy stocks. The quarterly index reclassification also sees the departure of several internet floats from the FTSE 250.
Out of the lead Footsie index will go Psion, maker of hand-held computers, Baltimore Technologies, the internet security firm, and telecoms upstarts Kingston Communication and Thus. Hanson, the builder, and Scottish & Newcastle, the brewer, are back in after three months away. They are joined by Ocean, the logistics business now merged with rival Exel, and Bookham Technology, the fibre optics company which floated after the last reclassification in March.The ejections from the FTSE 250 include Vocalis, the voice recognition company which spent just one day in the index after making it to the reserve list in March. It is joined by 365 Corporation and Moneyextra, the first internet companies to list in London after Freeserve last year.

The old economy dominates FTSE 250’s new members list, although some tech stocks have sneaked in by moving from Aim to the main market.The FTSE Equity Indices Committee meets today in Paris to rubber stamp the changes, which come into effect on 19 June and are based on companies’ market capitalisations. The four companies departing the Footsie soared earlier this year as investors piled into tech stocks. But their elevation to blue-chip status in the biggest ever shake-up of the indices in March came just as the technology bubble began to deflate. Since March, the techMark 100 index of New Economy stocks has lost 37 per cent of its value.”The outs are definitely overvalued tech stocks,” said Steve Russell, UK equity strategist at HSBC. “Ocean is an interesting entrant as a half-way house, a wheels and clicks company distributing goods at the end of the internet.”.

British Airways and the Dutch carrier KLM are today expected to announce that they have entered into exclusive negotiations to merge, a deal that would create Europe’s pre-eminent airline. British Airways and the Dutch carrier KLM are today expected to announce that they have entered into exclusive negotiations to merge, a deal that would create Europe’s pre-eminent airline.
The talks, if successful, would result in the takeover by BA of its smaller rival, creating a combined airline valued at more than £5bn with 90,000 employees and a fleet of almost 600 aircraft.Analysts cautioned, however, that any deal would face regulatory difficulties in Europe and the US, where the airlines have alliances with rival carriers.The negotiations could also break down over the issue of valuation, as they did when BA and KLM last attempted to merge in 1992. It was being suggested yesterday that the Dutch airline would hold out for just over £1bn – a 20 per cent premium to its closing price last night.The spur for the talks is the collapse of a planned alliance between KLM and Alitalia in April and the subsequent admission by KLM’s chairman, Leo van Wijk, that it was prepared to be a minority partner in a merger with another carrier.Rod Eddington, BA’s new chief executive, made it clear at the airline’s results two weeks ago that Europe was a priority and BA intended to be an important player in any consolidation.BA lost £300m in Europe last financial year while KLM also reported underlying losses of about 60m Dutch guilders after stripping out one-off gains from disposals.Analysts said the attraction to BA of a merger with KLM would be to gain access to the Dutch carrier’s Schiphol hub and the large numbers of transfer passengers routed through the Amsterdam airport. BA’s Heathrow hub, although the busiest international airport in the world, suffers from lack of capacity and predominantly handles point-to-point traffic.There could also be substantial savings from combining back office, engineering and marketing operations.