Scottish & Newcastle surges in London

LONDON -- Scottish & Newcastle's shares surged to an eight-year high in London on Wednesday, rallying as competitors Carlsberg and Heineken said they're mulling a takeover offer for the U.K. brewer. The shares rose 18.8% to stand at 756 pence, off a high of 778 pence. Carlsberg and Heineken said they're considering forming a consortium to make a cash bid for Scottish & Newcastle. Carlsberg and Heineken haven't yet made a formal approach, they said in a statement, adding that there can be no certainty an offer will be made. Still, Scottish & Newcastle's shares haven't traded at these levels since 1999. Beverage-sector peers also gained ground. Shares of SABMiller added 2.3%, while distiller Diageo moved up 1.8% and soft-drink bottler Britvic -- which also posted well-received sales figures on Wednesday -- added 7% in the FTSE 250 index. Also, shares of soft-drink and candy maker Cadbury Schweppes -- which recently pulled the plug on selling its U.S. beverage arm in favor of a demerger -- rose 2%. Sugar producer Tate & Lyle saw its shares increase 7.6%, with Associated British Foods advancing 3%. These gains helped the FTSE 100 index close 1% higher, adding 63.40 points to 6,677.70, building on small gains made earlier in the session. Other European stocks also rose in the afternoon session. See Europe Markets. Rio Tinto in decline The mining sector, however, kept top-index gains in check. Shares of Rio Tinto traded down 1.5% and Anglo American slipped 0.3%. Rio Tinto disclosed mixed third-quarter production results on Wednesday, noting that iron-ore production rose against the year-earlier period but that output from its Australian coal operations declined owing to transportation and infrastructure constraints. Margins at Rio Tinto's iron-ore operations in Australia's Pilbara region got squeezed because of higher production costs, though the company said it has taken steps to tighten controls and manage costs. "Stability in iron ore and aluminum operations and strength in gold was offset by weaker-than-expected volumes in copper and thermal coal," said analysts at Numis Securities. Noting Rio Tinto's comments on the Pilbara costs, the analysts said: "This is a somewhat unusual comment for a production report and suggests an escalation in already heavy pressure." They said they're likely to cut forecasts for earnings per share by between 1% and 2% as a result of Wednesday's update. Analysts at Credit Suisse reduced their stance on the mining sector to 7% overweight from 20% overweight, saying they believe the sector's overextended in the near term. Outside the top index, shares of Spirent Communications added 4.1%, recovering some of Tuesday's sharp losses. The company reassured investors that its third-quarter trading is in line with expectations. On Tuesday, many technology shares across Europe came under pressure as Swedish equipment maker Ericsson issued a surprise profit warning.