LONDON (ShareCast) - London blue chips rallied as US stocks rose in early dealings on Wall Street and are now back close to where they started the day.

Peroni and Castle beer brewer SABMiller is the best performing stock after reports that InBev, the company behind Stella Artois, is eyeing US brewer Anheuser-Busch and may be looking further afield.

Elsewhere in the alcoholic drinks sector, ING has raised its recommendation on the drinks giant Diageo to ‘buy’ from ‘hold’ and its price target to 1,180p from 1,150p on valuation grounds. The broker said that increased whisky consumption from emerging markets – particularly India – will help the Johnnie Walker owner.

Vodafone has turned lower after initially rising on results that met expectations for the year to March, with underlying profits up by 10.2% to £13.2bn on revenues of £35.5bn. In the current year Vodafone predicts sales of between £39.8bn to £40.7bn, with adjusted operating profit of £11bn and £11.5bn compared with £10.1bn in the year just ended.

Miners are also going well, with Lonmin and Kazakhmys the best in the sector. In the FTSE 250, Aquarius Platinum is strong, helped by rising prices for the precious metal.

India’s Vedanta is in focus after JP Morgan raised its price target on Vedanta to 3,170p from 2,737p but said high oil prices and lower zinc and lead prices have affected its near-term outlook on the company.

Car catalyst maker Johnson Mathey climbs on a “buy” recommendation from Merrill Lynch.

Faced with the prospect of relegation from the FTSE 100 Persimmon is lower, not helped by further evidence of a slump in mortgage approvals in April announced by the British Bankers’ Association this morning and a report on Sunday from Hometrack which predicted less than 5% of homes in the UK will change hands this year.

Fellow housebuilder Barratt Developments is even more affected by the housing data. Week-end press reports suggested British Land and Land Securities are mulling bids for Wilson Bowden Developments, the commercial property arm of Barratt. The business could fetch more than £250m, writes the Sunday Independent.

Northern Foods reported a profit from its ongoing businesses of £50.1m, up 25%, in the year to March. Pre-tax profits were £34.5m against £22.5m. "Despite some caution, we expect the underlying business to continue to make good progress in 2008/09," the statement added.

Engineering designer Aveva increased underlying profits by 70% to £ 47.9m in the year ended March from £28.1m a year earlier. Revenue rose 34% to £127.6m. " 'Looking ahead the board believes the outlook for the current year remains very positive for the business," it added.

Shares in architect firm SMC roared ahead as it said trading continues to be robust and it has a stronger order book than at the same stage of the year in 2007. The group said it had taken "actions to rationalise the business and to make further cost savings over and above those arising from the review in 2007 continue to progress well."

Military decoy producer Chemring has acquired Scot, a US-based manufacturer of cartridge-actuated and propellant-actuated devices. Chemring is paying $40m (£20.2m) in cash for Scot.

Stakebuilding by Laura Ashley has sabotaged Icelandic investment group Baugur's bid for menswear retailer Moss Bros. Baugur pulled out of the deal after completing due diligence because changes to the company’s shareholder base since the indicative bid was first announced made the “execution risk” unacceptable.

• News Channel