Market Report: Vodafone rises after talk of US operation sale

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Traders complained that the rumour mill was dead yesterday, despite a strong performance in London after surprise gains on Wall Street. As the rally took hold, the only speculation that spread through the City was that Vodafone Group was set to sell its US business.

One source close to the telecoms giant rubbished the talk, pointing to the fact that the chief executive, Arun Sarin, is in Davos, rather than masterminding the sale of such a significant chunk of the group. It is not the first unlikely rumour to hit Vodafone recently. Other hits included Mr Sarin's supposed departure and a bid for Carphone Warehouse. The group's shares were up 6.4p to 171.5p yesterday.

The only other takeover talk was in the mining sector, with yet more chat over Rio Tinto – BHP Billiton will definitely table a firm bid today, apparently – and Xstrata. The Anglo-Swiss group is in talks over a potential offer from Brazil's Vale. The stock fell on reports that the Brazilian government would oppose the deal. It then advanced with the market to close up 33p at 3,393p.

After the Dow Jones Industrial Average closed up 299 points overnight, the FTSE 100 stormed out of the traps. It remained strong all day, closing up 266.5 points. One trader said: "It was really a consolidation day today. Even though the market was up, many of us were caught on the hop by New York."The interdealer broker Icap received the backing of the market after it released what Cantor Index's David Buik called an "outstanding" interim management statement. The stock soared over 14.04 per cent in the morning to 666p as it announced that it would beat analyst forecasts. Profits are expected to be above £307m after strong trading in the wake of the credit crunch.

Also up off a bullish statement was the London Stock Exchange. The 10.96 per cent rise to 1751p provided some welcome respite for a stock that has fallen from record highs of 1977p at the turn of the year. A growth in volumes on its trading platform – again aided by market volatility – in the third quarter sent revenues up 14.7 per cent. Top of the leaderboard in the morning was HBOS as sentiment turned in favour of the banking sector, despite the shenanigans at Société Gé*érale. It was overtaken, but still closed 9.56 per cent up at 693.5p. Another riser was Barclays, up 36.2p to 491p after support from Collins Stewart.

The insurers continued to rally on the reports of Ping An Insurance eyeing a 100bn yuan stake in Prudential. Traders also reported rumours of a potential placing in the Pru, adding it could emerge as early as today.

Only four stocks ended in the red. One was Carphone Warehouse after Goldman Sachs started placing 12 million shares at 275p, a 5 per cent discount. It shed 1.46 per cent to 287.75p.

The stock setting the pace on the second tier was St James's Place, galloping up 27.05 per cent to 310p. The value of the wealth manager has halved in the past 10 months, but rallied strongly yesterday on a new business update. The company reported a 23 per cent rise in sales, and reiterated it could grow business by up to 20 per cent this year.

Another strong riser was HMV Group, up 10.5 per cent to 120.75p. The rises followed a Citigroup note, which raised its rating to "buy" on the back of a strong performance over Christmas, a structural overhaul at the company and improved trading patterns.

Disaster struck at Severfield-Rowen, which lowered its growth target estimates. The share price caved in, crumbling 37.14 per cent to 245p on the news, despite the group saying it would hit profit targets this year.

The waste management group Biffa retreated as the possibility of a counter-bid for the group receded. It fell 2 per cent to 318.5p on news that HG Pooled Management had pulled out of the bidding consortium with Montagu Private Equity. The supposed rival bidder, Global Infrastructure Partners, has taken its place on the 350p per share offer.

Worst AIM performer was Offshore Hydrocarbon, which sank 40.57 per cent to 104p on news that performance would fall "significantly short" of expectations for the full year.

On the upside, Coal International was the soar-away riser, up almost half to 27p. After early rises, the company put out a statement saying it had received a preliminary approach from an unnamed third party.

Another riser was IPSA Group, as it announced a memorandum of co-operation with the Government of South Africa, over developing gas-fired power plants. It rose 18.45 per cent on the news to 61p.

It was a first day of trading on AIM for China Eastsea Business Software. The IT and outsourcer to the petrochemical industry, spun out of the Chinese giant Sinopec, rose 11.76 per cent to 28.5p after moving from Plus Markets.