Market report: Wednesday close

By Rosamund Urwin
Updated:

 

City headhunter Michael Page was itself in demand today as speculators bet on a return of its suitor Adecco.

London Stock exchange traders,

Hopes were raised after chief executive Steve Ingham named his price, saying a sale of the group would be possible at 600p a share or more, valuing the firm at almost £2bn. Its shares remain a long way off that price, but Ingham's comments to the Swiss press sent them storming to the top of the mid-cap leaderboard, surging 30¾p to 360¾p. Talk is that an offer at 500p a share could be in the offing.

Michael Page has twice spurned the Zurich-based staffing giant's advances, walking away from talks last Friday after Adecco failed to raise its preliminary 400p-a-share offer.

But Ingham warned he was only a small shareholder, and Adecco may have to dig deep to come up with an offer that will prove tempting to Page's larger investors, which include Standard Life with an 11% stake.

Stocks initially clawed back some of yesterday's mega-losses but lost ground after another poor start in Wall Street, leaving the FTSE 100 up 51.4 points at 5371.8. A jump in metal prices boosted the heavyweight mining stocks but a large number of companies going ex-dividend wiped 16 points off the blue-chip index. The FTSE 250, a better barometer of UK Plc, slumped 34.3 points to 8833.3 as fears for the economy continued to weigh on retail and consumer stocks.

Expectations of a positive opening from Wall Street were dashed as the Dow continued its losing streak for a third day. The index sank 42.6 points to 11,306. The commodities sector dominated the Footsie winner board, contributing all five of the biggest gainers. Explorer Tullow Oil claimed the top spot, pumped up by comments from UBS that its shares look cheap. Raising its rating on Tullow to buy, the broker said it expects crude to continue to flow out of its wells with the possibility of further big finds next year from its drilling operations in Uganda, Ghana, Mauritania and Guyana. The upgrade sent its shares soaring 47½p to 741½p.

Ahead of half-year results next week, miner and takeover target Rio Tinto was 345p better at 4986p while its pursuer, BHP Billiton, put on 102p to 1622p, Kazakhmys climbed 79p to 1260p and Antofagasta added 33½p to 558½p.

Energy stocks were also on the up. Petrofac climbed 13½p to 563p and Cairn Energy advanced 92p to 2737p. Among mid-caps, Dana Petroleum shot up 78p to 1371p and Premier Oil soared 50p to 1283p. Nigeria-focused explorer Afren rose 7¼p to 100p as Citigroup initiated coverage of the shares with a buy rating.

Mecom, the media company run by former Mirror Group chief David Montgomery, was the biggest faller among mid-caps, diving 3½p to 18½p as sentiment soured against the newspaper publisher following disappointing first half results. House broker Cazenove cut the stock from outperform to in-line and expressed its concerns over the challenging trading environment after a 2% slump in advertising revenues.

Numis is still telling clients to buy the shares, but says earnings forecasts for 2008 are likely to be cut by 11% and by 4% for 2009. Mecom's gloom spread to the UK newspaper groups, with Trinity Mirror down 5½p to 95p and Johnston Press off 2p at 52½p. Telecoms giant BT, one of the top flight going ex-dividend, languished on the loser board as Collins Stewart told clients again to shed its shares. The broker believes dividends are likely to be cut, and expressed its concerns over cash generation. The shares responded with a drop of 12p to 165.3p.

Shares in AIM-listed Northwest Biotherapeutics fell off a cliff as the biotechnology company admitted it will run out of cash next month unless it can find fresh funds. As it announced widening losses, the shares plummeted 59p to 34½p.

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Tomorrow's agenda

Builder Persimmon kicks off what analysts are tipping to be the grimmest reporting season for the sector in decades with its first-half results. The company said last month that sales were down about 4%, and forecast a further 5% slump during the rest of the year. analysts now fear that may be far too optimistic. Dresdner Kleinwort predicts a 63% drop in earnings and a cut in the interim dividend of about 39%. it also believes Persimmon will report a further drop in private reservations and a rise in the cancellation rate. investors will be looking for guidance on the extent it expects to write down the value of its land bank.

Retail sales suffered their biggest drop on record in June as consumers tightened their belts after a shopping binge in May. The City will hope for better news from the Office for National Statistics on July sales, but the figures are likely to add to the High Street misery.

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