AB FOODS rose 2.28 per cent as Merrill Lynch upgraded its recommendation on the British food group from neutral to “buy”, saying that planned European Union sugar reforms due to be outlined today would not hurt the company as much as had been feared previously.

ABF’s British Sugar division is Europe’s third-largest beet sugar producer and is the sole producer of beet sugar in Britain, but Merrill said that the proposals were expected to contain details that would dilute the impact of expected sugar-price cuts, allowing ABF to offset all but £23 million of the impact.

Merrill believes that strong growth at Primark, ABF’s retailing venture, and further acquisitions will help to drive future performance. AB Foods rallied 18p to 806p, the best performance in the FTSE 100, which gained 10.1 points to 5,082.1 amid light trade.

However, fears about the impact of the sugar reforms rattled Tate & Lyle, which gave up 5¼p to 478¾p. The sugar-to-sweeteners group has shed almost 13 per cent of its value in two months after conceding this year that it expects the reforms to have a negative impact on the company.

GlaxoSmithKline, Europe’s biggest drug maker, gained 23p at £13.60, helped by a positive research note from Merrill Lynch on its drug pipeline. After meeting GSK’s oncology division over lapatinib, its cancer therapy, and its blood platelet drug 115, Merrill said that its pipeline was continuing to progress.

Wm Morrison Supermarkets edged 1p higher after brokers digested the appointment of three new non-executive directors to the board after the market closed on Monday. Seymour Pierce interpreted the appointments as a victory for David Jones, deputy chairman, who has led the drive to restructure the Morrison board in the face of opposition from Sir Ken Morrison, its chairman.

The broker repeated its underperform recommendation, while awaiting more precise guidance on current year profits from the company.

Rentokil Initial added 2p to 158½p after the High Court approved yesterday a share scheme designed to boost distributable reserves from which the support services group can make dividend payments through a reorganisation of its balance sheet. The scheme was approved by investors last month. Reuters gained 2¾p to 398½p after Credit Suisse First Boston reiterated its “outperform” rating on the media group amid hopes of an upbeat strategy presentation in the third quarter.

• NEW YORK: Shares ended the day mixed as investors kept an eye on near-record oil prices and debated the prospect of a social security reform package without private investment accounts. The Dow Jones industrial average closed 9.40 points lower at 10,599.70.

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