Marks & Spencer bucked the weak market trend in London yesterday as investors increased their positions after an upbeat presentation from its chief executive and the publication of a bullish research report from its house broker.
Although Stuart Rose uttered nothing price sensitive at Deutsche Bank's annual retail conference in Milton Keynes, those present said the boss of Britain's biggest clothing retailer was on remarkably good form and his confident tone suggested that trading had remained strong.
Traders noted that Mr Rose's speech had coincided with the release of an upbeat note from Morgan Stanley, one of M&S's two corporate brokers. Increasing her target price to 550p, the analyst Claire Kent said it was possible that sales densities at M&S could rival those of Next, (off 2p at £16.88) within the next five years.
With Ms Kent also making the point that at 550p M&S would still trade at a discount to the rest of the retail sector, the shares closed 14.75p up at 510p - the second-biggest riser in a weak FTSE 100.
In the wider market, leading shares closed lower, dragged down by heavy selling of mining and oil stocks after overnight weakness in gold, copper and oil prices. However, the market closed some way from its early lows helped by another bid for a blue-chip company. This time the airport operator BAA was the target. Its shares surged 97.5p to 752.5p after Spain's Grupo Ferrovial revealed it was considering a cash offer.
All of which helped the FTSE 100 end the session 21.7 points adrift at 5725.1 with Kazakhmys, off 32.5p at 819.5p, BHP Billiton, 37p cheaper at 976.5p, Anglo American, 75p weaker at £20.12, and Antofagasta, 66p lighter at £20.13, among the biggest fallers.
Elsewhere, the FTSE 250 eased 2.8 points to 9240.7, while the FTSE Small Cap faded 1.1 points to 3513.8.
Once again Lloyds TSB provided the day's speculative interest. In heavy volume, its shares moved up 9p to 533p on talk that an approach for the bank could be made this week. Various names were mentioned from Wells Fargo to the Dutch bank ABN Amro. More sober individuals attributed the rise to the excitement caused by the Spanish move on BAA. Readers will recall that Lloyds shares moved sharply higher last week on rumours of an approach from the Spanish bank BBVA.
All told, the bid for BAA excited a number of stocks, particularly big infrastructure plays such as United Utilities, which was 19.5p higher at 700p; Severn Trent, up 24p to £11.83, and National Grid, 9p stronger at 591p.
Woolworths was once again one of the most heavily traded mid caps stocks. More than 68m shares changed hands as talk of stake-building by Baugur, the Icelandic investment group, refused to die down. Market professionals reckon that Baugur bought 50m Woolworths shares on a contract for difference on Tuesday. The shares rose 1.25p to 35.75p.
The software company Autonomy was the FTSE 250's biggest riser, however, gaining 40.25p to 469.25p on the back of positive feedback from an investor roadshow. Elsewhere, SkyePharma, the troubled drug delivery group, eased 0.5p to 40.25p despite Tuesday's late news that the ex-chairman Ian Gowrie-Smith had purchased 500,000 shares, lifting his holding to 8.2m shares.
Among the small caps, Telecom Plus, supplier of gas, electricity and telephone services, rose 7.25p to 163p after Evolution Securities started coverage with a buy recommendation and a punchy 220p target price. The analyst Ken Wotton reckons the company will solve the problems caused by surging wholesale gas and electricity prices. He says it will do this either through a hedging arrangement or by raising prices.
Elsewhere, there was another day of heavy trading in Sanctuary Group, down 0.5p to 1.4p on volume of 101m shares. Traders said this had been prompted by a London Stock Exchange memo reminding member firms of their settlement obligations. The belief in the Square Mile is that the LSE is worried about Sanctuary because about 17% of its share capital is on loan and the company has just announced a complex refinancing, the terms of which have wrongfooted many short sellers who are scrambling around trying to get their hands on stock.
A similar problem could be looming in MFI Furniture Group, 0.5p higher to 66.5p, according to market professionals. If, as rumoured, the company is working on a rights issue at 50p then short sellers may struggle to close their positions if the shares trade ex-rights on the announcement. Traders note that MFI is the most shorted stock in the market with around 28% of its share capital on loan.
London Clubs International was in demand again. Its shares rose 7p to 148p on continued talk that the company has received a £115m offer for its Les Ambassadeurs casino from the Indonesian tycoon Putera Sampoerna. The talk in the market is that the sale could pave the way for a merger with rival Stanley Leisure, down 0.5p at 770.5p. French Connection faded 10.25p to 250p on talk that Baugur is close to finding buyers for its 13.7% stake, albeit at a big discount to yesterday's closing price.
Building blocks
Consolidation rumours were swirling around the housebuilding sector again yesterday. This time Redrow, up 7.5p to 555p, was the name in the frame amid talk of a merger with rival Bovis Homes Group, 33p stronger at 817.5p. Since Persimmon, 9p better at £13.63, completed the acquisition of Westbury, a deal that catapulted it into the FTSE 100, traders have been predicting further corporate activity. Most expected the next move to be from one of the sector's big players, which are Barratt Developments, 9p lower at £10.40; Taylor Woodrow, up 5.5p at 407p, or George Wimpey, 6p higher at 535p. However, with valuations at their highest in years, analysts now see merger deals between the sector's smaller players such as Redrow and Bovis as more likely than takeover bids.