Market report: Tuesday close
CITY speculators were chasing shares of Scottish and Southern Energy sharply higher today in the belief the company could be the first big takeover target in 2006.
The price raced up 14p to 1023p during trade today, making the shares the biggest FTSE 100 risers and valuing the company at almost £9bn. But it closed 7½p lower at 1017p. The talk is that it could soon receive a bid from Swedish nuclear power generator Vattenfall. Some brokers have poured scorn on the story, however, claiming the company does not have the funds to launch an offer for SSE.
At the last count, its war chest contained between €2bn (£1.4bn) and €3bn, leaving it well short of the cash required to secure SSE. But Vattenfall may feel the need to establish a toehold in the UK generation market as it lurches back toward nuclear power to reduce the damage from soaring oil and gas prices.
The Swedes stirred the rumour pot just before Christmas by appointing merchant bank NM Rothschild to explore likely takeover targets.
SSE was last year being seen as a possible merger partner for rival Scottish Power, up 4½p at 540½p, while the latter had to contend with a takeover approach from German utility giant E.On. That move was later abandoned.
Share prices generally showed signs of fatigue as the blue-chip barometer dropped below 5700. This was despite a strong performance on Wall Street overnight that carried the Dow back above the 11,000 resistance level. The FTSE 100 index closed 42.7 points at 5688.8.
Late this afternoon the London Stock Exchange has also accused Macquarie Bank of trying to buy it 'on the cheap' as it again rejected a £1.5bn hostile bid from the Australian comapny.
LSE has already branded the 580p a share offer 'derisory' and tonight said the price 'ignored the quality and strength' of the business. The shares closed 9p lower at 615p.
The High Street banks had a poor year in 2005, and it looks as if 2006 will be little better, according to one leading City broker. US-based Citigroup Investment Research says the bank sector is more vulnerable to disappointment on the earnings front than other UK sectors or European equity markets. It therefore expects another dull performance this time around.
Citigroup has lifted the target price on Alliance & Leicester, steady at 966p, from 750p to 860p but continues to rate the shares a sell. Barclays, down 9p at 619p, is also named as a sell with its price tweaked from 500p to 550p, as is Northern Rock, 3p weaker at 934½p, where its sights have been raised from 760p to 850p.
This is Money 2006 predictions
• UK house prices
• World stock markets
• The UK stock market
• Midas share tips
• A full round-up of newspaper and magazine tips
• A full round-up of newspaper and magazine tips
• Daily Mail share tips
Bradford & Bingley, 4½p cheaper at 406¼p, is seen as a hold while its target goes up from 320p to 410p. Lloyds TSB, off 4¼p at 495½p, is viewed as a sell but the target is up from 450p to 500p. The only buy recommendation is Royal Bank of Scotland, down 15p at 1777p, where the target increases from 1900p to 2050p.
Harry Hedge Fund and his pals were behind the 12p rise to 469p in P&O. This follows reports that three hedges have taken out bets that Singapore-owned Temasek may yet launch a counterbid for P&O, currently target of an agreed offer from Dubai Ports World.
ABN Amro, a serial critic of Ryanair, has again turned bearish on the Irish budget airline. With British Airways, down 6¾p at 324p, announcing plans to plunge back into the no-frills market, the Dutch broker believes Ryanair, down 13 cents at €7.97, is vastly overvalued compared with its own target price of €6.80. It has downgraded the stock to a sell, saying the company is exposed to flattening yields and a still-high oil price.
Royal Dutch Shell shaded 5p to 1928p on news that 26 pension funds are launching a class action over the company's overstatement of oil reserves.
A trading update from Topps Tiles made pleasant reading and the shares were down ¾p to 213¼p. Broker Bridgewell Securities has repeated its buy rating and says the management is confident of an improvement in sales growth. Rival Numis Securities rates it a hold and has raised its sights from 205p to 225p.
MJ Gleeson, the housebuilder and construction company, was up 13¼p to 360½p after its rejection yesterday of a £177m, 345p-a-share approach. The suitor is an AIM-listed shell company understood to be Castle Acquisitions, chaired by JO Hambro Capital Management director Christopher Mills.
News of a major gold find in Turkey lifted Ariana Resources 1½p to 11p. The company has found a wide range of gold mineralisation at its Kiziltepe prospect in Balikesir, western Turkey. Online gaming outfit ukbetting was ¼p lighter at 58p after renewing its exclusive agreement with internet poker solutions provider CryptoLogic until 2009.
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