Market Report: Takeover talk pushes Xstrata past £40 mark

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Xstrata's shares, driven by renewed speculation concerning Vale's intentions, swung past the £40 mark – to 4,060p, up 113p – at which the Brazilians were believed to have pegged an early, indicative offer to take over the company.

At the time, Xstrata's shares were trading at around £38, and Vale was supposed to have been swiftly spurned by the company and Glencore, the Swiss commodities trader which owns more than 30 per cent of the Anglo-Swiss miner.

Yesterday, two conflicting rumours went around the market, both apparently sourced from someone close to the negotiations. One suggested that Vale was ready to table £47 per share, while the second maintained that the deal was still in the works, and no offer would be forthcoming in the next few days.

Our source (also located close to one of the parties) suggests that the latter story is more likely to be true – Vale is still working on the deal, and is unlikely to make an offer for a few weeks yet.

Elsewhere, a round of negative broker reports quashed any chance of a respite for Alliance & Leicester's share price, which slumped further to 479.50, down 12.5p.

After disappointing results on Wednesday, investors continued to exit the stock after news of a round of reductions in analysts' price targets, to 355p from 612p at Lehman Bro-thers, 480p from 630p at JP Morgan, 455p from 627p at Goldman Sachs, and to 400p from 620p at HSBC. HSBC dealt an additional blow by revising its rating to "underweight" from "neutral".

Overall, the FTSE 100 index closed up 38.60 points at 5,932.20. The benchmark index, lifted by fresh hopes of a reduction in US interest rates, touched a high of 6,004.40 before falling back on some weak American economic data, which inspired some early losses on Wall Street. The FTSE 250 was also firmer yesterday and gained 57.30 points 5,932.20.

On the FTSE 100, Scottish & Newcastle, after being buoyed by a speculative rally on Wednesday, fell after SAB Miller ruled itself out of the race to acquire the company.

Investors were drawn to the stock after rumours suggested that SAB was considering countering Carlsberg/Heineken's 800p-per-share bid with its own 850p per share offer. Yesterday, the enthusiasm evaporated after SAB issued an overnight saying that it had no such intention, taking S&N's share price down by 20.5p to 787p. SAB, on the other hand, was lifted to 1,096p, up 14p.

Strong commodities prices drove the miners again yesterday. Vedanta climbed 43p to 2,261p, while Rio Tinto, which said it was selling its stake in the Cortez gold mine in Nevada, gained 102p to 5,822p. Anglo American, which gained 96p to 3,257p, and Antofagasta, which gained 16.5p to 845p, also had a good day.

Lonmin rose as well, buffeted by rising platinum prices and continuing speculation about a prospective bid from the Chinese. The company's shares gained 71p to 3535p.

On the FTSE 250, William Hill and Ladbrokes were hit by a negative report from Investec, which downgraded its estimates for the two companies. The broker said that while William Hill "is struggling in its online division", "Ladbrokes remains under pressure in UK retail". Consequently, Investec cut its target price for Ladbrokes to 260p from 303p – its shares survived the downgrade and rose by 0.25p to 318p – and for William Hill to 395p from 474p – its shares were depressed 3p to 400p yesterday.

Among small caps, Hogg Robinson, the business support services group, failed to inspire any support from talk of a possible bid. The whispers, borne of some large trades in the company's shares, had little detail, and the shares closed down 0.25p at 59.75p.

Bede had a rough day yesterday. The company suffered after revealing that, further to an earlier announcement indicating that it was in preliminary discussions with interested parties, it had received an indicative offer which was significantly below its current market value. Unsurprisingly, the news prompted investors to abandon the stock, which closed down 38.65 per cent, or 0.63p, at 0.88p.

On AIM, the commercial real estate consultancy Colliers CRE was up on the back of some vague bid speculation. The chatter, which took the company's stock up by 14p, or 23.14 per cent, to 74.50p, suggested that a bigger sector counterpart was preparing an offer for the business. No names were suggested, nor was there any indication of the likely level of the prospective bid.

Also on AIM, Empyrean Energy, the oil & gas explorer and producer which was the subject of a surprise sell-off recently, saw its share price recover to 19.75p, up 2.25p, as investors returned after a few days of relative calm.