Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:00 EDT, 11 May 2007

Investors were digging deep for mining giant Rio Tinto today as talk of a hostile £50bn bid from rival BHP flared up again.

The shares soared by 113p, or almost 4%, to 3652p, with investors further excited by talk that Warren Buffett had bagged 35m of them via Citibank. Two large parcels of shares, one for 14.5m and one for 21m. were sold just before midday. Buffett recently told investors in his Berkshire Hathaway vehicle that he wanted to buy 'something huge'.

Rio had to issue a statement two days ago, denying knowledge of an approach from BHP following a 6% rise in shares on the Australian stock exchange, where Rio also has a listing.

With no statement from Rio today, the word is that any move is likely to be highly aggressive and would have to offer a considerable premium to the current price. Morgan Stanley recently priced Rio at 3880p on fundamentals alone, and a realistic bid would have to offer at least £40 a share.

Traders were unwilling to dismiss fresh rumours that private equity might be sniffing around. 'Nothing is too big for them these days,' said one. Most of the other major miners benefited from the attention, notably Vedanta Resources, up 27p at 1399p and Anglo American, 83p ahead at 2935p.

Interest in Rio and a handful of other bid stories reversed early losses and helped propel the FTSE 100 up 41.6 points to 6565.7. After yesterday's three-figure fall, the Dow also headed up in New York, gaining 50.60 points to 13,265.70.

Rumours of an imminent bid for Standard Chartered saw the bank climb 62p to 1605p, with talk of a Middle East buyer popular.

However, share-buying today by most of the directors underlined that rumours of an offer are, at present, just that.

But putting mergers to one side, Lehman Brothers reckons the shares have substantially underperformed those of the bank's Asian peers, and offer excellent value. Lehman bumped up the stock to overweight from equalweight and raised its target to 1700p from 1584p. It says India and the Middle East provide between 30% and 35% of group profits and are likely to be growth drivers.

Struggling telephone directories group Yell rang up a 11p rise to 508½p as investors warmed to rumours that Google is interested.

Software group Autonomy slid 38p to 732p on the back of a puzzling placing of 9.5m shares, ostensibly to strengthen its already healthy balance sheet. Numis analyst David Toms, who said he had been expecting Autonomy to return cash to shareholders, said the call had an opportunistic feel to it, given comments on a weakening environment coming out of the US. He has downgraded Autonomy from add to hold.

There was a buzz around Ladbrokes, with punters gambling on a bid from Apax Partners. This story first emerged earlier in the year although a likely price oscillated between 440p and 550p. Britain's biggest bookmaker, up 2¾p at 432p, has been seen as a likely target for private equity since demerging from Hilton Hotels.

EasyJet added 16p to 614½p after an upgrade to buy from hold by Deutsche Bank. It sees the short-haul market growing by 10% this summer and thinks fears about yield declines are overplayed.

TAKING STOCK: Stock market news in brief

Banking & finance
Gartmore has increased its holding in AIM-listed Matra Petroleum, buying ninem shares at an undisclosed price. This lifts its holding in the central Europe and Russia oil and gas explorer to 48.64m shares, or 15.3%.

Building & property
John Armitt has been told his first job at the Olympic Delivery Authority will be to thrash out with construction company Sir Robert McAlpine a final specification and price for the design of the main stadium, says Building magazine.

Consumer
Goldman has cut Punch Taverns from buy to neutral, the shares having reached its 1280p target. The pubs chain has improved its estate but the future is clouded by falling asset values, the smoking ban and consumer slowdown.

Economy
The City is braced for a damning verdict from the High Street on the Bank of England's failure to keep inflation under control and the resulting interest rate rises. Sainsbury's, Next and former Dixons group DSGi all report latest figures on the same day next week.

Engineering
Avingtrans managing director Steven Lawrence has exercised 112,000 share warrants at 50p each, lifting his holding in the AIM-listed engineering technology specialist to 362,000 shares, or 2.06% of the company.

Health
The victory for Stefano Pessina in the bid battle for Alliance Boots will see it open operations in Brazil and Chile, Retail Week reports. It adds that it would be the first attempt by a British retailer to break into Latin America.

Industrials
British Polythene describes trading as reasonable despite sluggish volumes, and it expects first-half profits to be the same as last year. The polythene film, bags and sacks maker says the outlook for polymer prices looks firm.

Leisure
DM Group traded at a four-and-a-half-year high after saying trading this year had remained strong with all units operating profitably. The home gaming specialist also says the integration of the two businesses acquired last year continues ahead of schedule.

Media
Teather & Greenwood has cut media company Emap's rating from hold to reduce, with a price target of 776p, citing structural changes in radio and magazines as the cause. The current price of 825p reflects cost savings from restructuring.

Natural resources
Merrill Lynch has repeated its buy rating and 2200p target for gas and oil explorer Cairn Energy in light of two new oil and gas discoveries in Rajasthan by its Cairn India subsidiary, and remains optimistic of further significant finds.

Retailing
Car dealer Inchcape failed to impress with its latest trading update. UBS has maintained its neutral rating and 585p target while Citigroup stays at hold. First-quarter trading was in line with like-for-like sales up 2.9%.

Support services
Balfour Beatty's sale of its stake in the Devonport naval dockyard for a £50m profit will allow it to concentrate on its core engineering and maintenance businesses says Panmure Gordon. But the broker warns that the shares are trading around 15% above its valuation.

Technology
Commercial mobile media services provider Emblaze predicts savings of $3m (£1.5m) a year thanks to the use of an offshore centre in St Petersburg, Russia, which was bought by BluePhoenix Solutions, a unit of its Formula Group.

Telecoms
Deutsche Telekom workers are due to strike today in the first walkout since privatisation more than 10 years ago. They are protesting at plans to move 50,000 workers to a newly created T-Service customer service division to save costs.

Transport
Ryanair is starting eight new routes from its base at Dusseldorf Weeze in Germany. The budget airline will launch flights in September to Fuerteventura, Malaga, Marrakesh, Milan, Seville, Trapani in Sicily, Valencia and Växjö in Sweden.

Utilities
The City Council of Loviisa in Finland has voted against selling land to German power company E.On for a nuclear power station, say Finnish media reports. The vote reversed an earlier decision to sell the land to the utility after it sparked public anger.