LONDON (ShareCast) - Volatility continues to plague London, with the leading index losing a large chunk of its earlier gains as British Airways hit turbulence on pensions fears and rising oil prices.

The BA pension schemes have a £1.74bn hole in them, the trustees announced today in their annual update. A surge in crude prices to above $100 a barrel raised fuel costs concerns.

HBOS is still the star performer after Lloyds TSB rode to the rescue with a £12.2bn for the Halifax owner that will create a UK “Super Bank” worth about £28bn. HBOS shareholders will get 0.83 Lloyds shares for every HBOS share held.

There was no news on job losses, but Lloyds estimates that the deal will lead to an additional contribution to earnings before tax from cost synergies "significantly" in excess of £1bn a year by 2011. Some fear around 40,000 of the 142,000 employed by the pair face the axe. Industry experts predict around 1,000 branches could close due to the massive overlap between the country’s third and fifth largest banks.

Housebuilders are rejoicing at the deal which secures the future of HBOS, a major lender to UK housebuilders, as well as the commercial property industry. Persimmon and Barratt Developments both rack up double-digit percentage gains.

Elsewhere in the banking sector HSBC seems to have spent the last two days denying it is on the acquisition trail. Yesterday unnamed sources at the multi-national bank denied HSBC was interested in acquiring HBOS, while today another unnamed insider has denied a report on US TV channel CNBC that it is considering the purchase of Morgan Stanley.

Bank of Ireland, which yesterday announced a dividend cut, holds steady today even after JP Morgan slashed its target price on the bank to €2.70 from €4.30.

DIY retailer Kingfisher saw retail sales rise 2.5% in the 26 weeks ended 2 August, but fall 2.6% on alike for like basis. Pre-tax profit fell 3.7% to £206m from £214m a year ago on sales up 11.1% to £5.13bn.

Tate & Lyle said it continues to trade satisfactorily and expects profits from the group's continuing operations in the first half to be broadly in line with the corresponding period. “As we stated in July the general deterioration in global economic conditions coupled with the increased volatility in commodity prices, energy costs, and exchange rates make any statement about the outlook more than usually difficult,” said the group. “Nevertheless the board is confident that the group currently remains on track to make progress for the year as a whole,” it added.

Building and civil engineering group Kier reported a 12.2% rise in underlying pre-tax profit for the full-year, but said the market for its housing business has been tough with 18.6% fewer sales achieved and a continuing deterioration in reservation levels. Underlying profits before tax and exceptional items rose to £87.1m in the year ended 30 June compared with £77.6m last time. Revenue was up 11.6% to £2,374.2m. “

Construction and regeneration group Morgan Sindall has been selected by North Lanarkshire Council as one of three framework contractors on the council’s schools modernisation scheme. The four-year contract is worth in the region of £100m.

Military decoy producer Chemring said its order book has increased to a record £448m, which is 53% higher than at this time last year. Trading in both the Energetics and Countermeasures divisions for the four month ended August continues to be encouraging, with year to date revenues 38% above and operating cash flow 63% above the same period last year.

Instrumentation and controls firm Spectris is to acquire the assets of Siemens AG’s Machine Vision Business for $11.5m. The acquired company is an industry leader in automatic identification and data capture.

Animal biotechnology company Genus is to lease a new 600 sow pig farm in China. The new herd will function primarily as a sire line nucleus, producing a range of high-performance boars to maximise the rate for multiplication of elite genetics to be used by China's leading pork producers.

Landsbanki maintained its ‘buy’ rating on Genus after the announcement saying it ‘puts flesh’ on the company’s growth plans.

Royal Bank of Scotland has lowered its rating on the bus and rail operator Go-Ahead to ‘add’ from ‘buy’, saying fuel costs and other expenses will have a bigger impact in 2009.

Life sciences company BTG has made an agreed bid for drug developer Protherics. Protherics shareholders are being offered 0.291 new BTG shares for every Protherics share held in a deal that values the whole of Protherics at around £218.1m.

Industrial fastenings distributor Trifast warned that the outcome for the year to 31 March 2009 is likely to be well below current market expectations.

Electronic components distributor Abacus Group warned that full year sales will be slightly lower than during 2007 and below its previous expectations, but cheered up shareholders with the revelation that it is discussions with a number of parties interested in buying Abacus.

Fixed income fund manager BlueBay Asset Management achieved record growth in assets under management in the year to end-June, but pre-tax profits dipped as difficult market conditions resulted in a performance fee income being halved.

Nickel and platinum miner Braemore Resources was clearly alarmed by the sharp share price fall that followed its downbeat earnings statement, and moved to reassure investors today by saying it continues to be well financed, and that it is not aware of any material adverse change to the prospects of the company and continues to operate in line with management’s expectations.

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