Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:02 EDT, 10 November 2006

Not everyone, it seems, was convinced by yesterday's claims that J Sainsbury is vulnerable to a private-equity takeover.

Stock shortages today pushed shares in the supermarkets chain 6p higher to a new four-year high of 420p ahead of next week's half-year results. But ABN Amro downgraded the shares from hold to sell. The broker is looking for a rise in pre-tax profits next week of almost 60% to £188m, although others are confident profits will tip the scale at more than £200m.

ABN Amro says these figures will confirm the group's recovery programme remains on track, but reckons the share price is racing ahead of events and is discounting substantial upgrades, or even a bid, neither of which it feels is likely.

The founding Sainsbury family continues to hold 30% of the shares and has remained loyal throughout the troubles that have seen it slip from first to third in the supermarket league table.

Do not expect any move for Scottish Power, 14½p richer at 741p, from Iberdrola of Spain imminently — that's the message from the tapas bars of Madrid. Iberdrola's chief executive and chief financial officer are returning to the Spanish capital after a week in the US, where they have been on long-scheduled investor roadshows.

Iberdrola's rationale for a deal is that with the creation of a European power market, it needs a presence in Britain. It is a leader in the global windpower industry, and Scottish Power is the UK's most forward developer of wind farms.

However, sources believe ScotPower's shares may have got a little rich for the Spanish even though they do have their own government's generous tax breaks to do international deals.

Cairn Energy jumped 74p to 1963p amid claims that India's state-owned oil company ONGC wants to bid for the remainder of Cairn's extensive Rajasthan assets before they can be floated separately on the Bombay Stock Exchange in the New Year.

ONGC currently has a 30% stake in the assets, which include 3.5bn barrels of oil, while Cairn holds the remaining 70%. Cairn expects to raise at least £1.8bn from the flotation.

UBS has repeated its buy rating and 2450p target on Cairn and says investors should take advantage of any nervousness in the shares ahead of the flotation.

Miner Lonmin surged 94p to a record 3183p ahead of results next week, amid wild talk that an offer of 3800p is being lined up. Broker Morgan Stanley set the ball rolling by rating Lonmin overweight and one of its top picks. It has boosted its price target by 210p to 4200p to reflect rising metal prices.

Music maker EMI, which this year tried to buy Warner Music, was downgraded by Morgan Stanley. The shares closed down 1p to 278¾p after suggestions it may find itself the target of a bid from Microsoft. Some brokers argue EMI looks expensive, and such a bid would damage its relationship with other labels.

Fund manager Henderson, which has upped its bid for John Laing, fell 6¼p to 108¼p after Morgan Stanley placed 14.4m shares at 110p.

Share prices generally had that end-of-the-week appearance as the FTSE 100 index fell 23.1 to 6208.4. The Dow slipped 2.60 to 12,100.70 on Wall Street this afternoon.