Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:59 EDT, 23 March 2007

Reports that Wall Street giant Citigroup might throw its hat in the ring for Dutch banker ABN Amro injected life into Barclays today.

The UK bank firmed 19p to 758p as news emerged that a serious faction within Citigroup is pressuring its chairman and chief executive Charles Prince to bid for ABN Amro.

Not only might this derail a costly takeover by Barclays, it also reflects the Americans' serious European ambitions which have in the recent past led some to see Barclays itself as a juicy acquisition for Citigroup.

Sources quoted today in the Wall Street Journal said Citigroup has been eyeing ABN Amro for a while. A takeover would strengthen its position in continental Europe and Latin America. An analyst at Petercam said a Dutch-American tie-up would create more synergies, and suggested Citigroup would be able to pay more than Barclays.

Earlier this week, Barclays said it was in preliminary discussions that could lead to the creation of an £80bn financial powerhouse.

Collins Stewart analyst Alex Potter, who rates Barclays a buy, said he saw a Barclays takeover of ABN Amro as the worst outcome with limited cost savings. But he doesn't think it is very likely, arguing that either Santander or BBVA of Spain would make better owners of ABN.

Leading shares in London got off to a poor start, dogged by a mixed performance on Wall Street and lingering fears over the US economy. However, a handful of well-received broker upgrades together with bubbling mergers and acquisitions hopes saw the FTSE 100 reverse direction. The blue-chip index was up 21.4 points at 6339.4, and has risen by 5% since touching 6000 on Wednesday.

Plenty of buyers were coming in for Pearson, up 34p at 865p on renewed break-up hopes. Reports that Wolters Kluwer has sold its educational publishing business for more than €750m (£510m) have again focused attention on Pearson's huge educational division. Pearson boss Marjorie Scardino is known to be vehemently against a break-up, but traders are increasingly aware of rumours of private equity interests keen on selling.

Media group Reuters has seen its shares creep higher since it unveiled a profits fall at the beginning of the month. They added 12¼p to 468¼p after Lehman Brothers changed its view to overweight from underweight and raised its target price 5p to 550p.

Standard Life was down 1½p to 324½p, encouraged by director share-buying. Chief executive Sandy Crombie snapped up another 30,000 shares while chairman-elect Gerry Grimstone added 37,705 to his 63,000 holding.

Sainsbury's, down ½p at 549½p, and British Airways, 8p lower at 518p, led the fallers. Plumbing supplier Wolseley was further punished for its exposure-to the US housing market, down 14p at 1253p, with data out this afternoon expected to add to the gloom.

Interest in the second-line oil explorers was reignited by a major research note from Credit Suisse. It favours Cairn Energy, which was booted out of the FTSE 100 earlier this month after its shares slumped from a 2007 high of 1810p to a 15-month low.

Today they bounced back 28p to 1630p after Credit Suisse told clients that the oil explorer is now massively undervalued, and predicted an 18% upside on the current market price. CS also started coverage of Burren Energy and Premier Oil at neutral, arguing that there is little value in the sector other than Cairn. But Premier jumped 35p to 1267p as it revealed another gas discovery in Indonesia.

PartyGaming rose more than 8%, closing at 53¾p. Traders said investors were encouraged by strong trading figures in February and a target increase from analysts at UBS.

A major deal with Yahoo saw Aim newcomer, online marketing services provider Infoserve, close up 19p to 50p.