Market report: Thursday close

By MICKEY CLARK FOR MAILONLINE
Updated: 12:02 EDT, 28 August 2008

The UK's third-biggest supermarket chain J Sainsbury put in a late spurt this afternoon as speculative buying pushed the price 25¼p higher to 344p.

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City spivs say another bid, worth 500p a share, is being lined up for the company. They say the Qatar Investment Authority, which already owns 477m shares, or 27% of the company, has been adding to its holding. Last year the QIA pulled out of bid talks with Sainsbury after failing to agree a price.

Traders just put it down to an old fashioned bear squeeze. Turnover was lacking with just 7m shares changing hands.

Shares generally recovered from a lacklustre start with the help of strong opening gains on Wall Street this afternoon. City investors were forced to digest a long list of companies reporting that included Diageo, up 20½p at 10000p, Kazakhmys, 34p lower at 1305p, Amec, 11½p better at 835p, and Premier Foods, down 5¼p at 92p.

There were also concerns that hurricane Gustav will disrupt oil supplies if it reaches the Gulf of Mexico. But those concerns were swept aside as the FTSE 100 index rose 73.1 points to 5601.2, while in New York the Dow climbed 96 to 11,598.5.

Financials underpinned leading shares with investors drawing strength from Crédit Agricole's better than expected results and talk of a major European buy programme. But dealers say it may be stretching a point to suggest this may signal the worst of the credit crunch is over. Even so, HBOS advanced 12¼p to 305½p, while Royal Bank of Scotland added 8&frac14p to 230;p. But RSA Insurance led blue-chips higher with a rise of 8.3p to 154.1p on turnover of more than 16m shares inspired by talk that it may soon become a target for Zurich Financial Group. The mutter from the gutter also claims Swiss Life may be looking for more acquisitions.

BT Group stood out with a leap of 7.2p to 172.5p after Goldman Sachs upped the shares from neutral to buy. They have underperformed the sector by 40% during the past year, and Goldman says their 'beaten-up valuation' has tempted it to upgrade.

Takeover favourite ITV jumped 1.7p to 43.8p on revived speculative buying. One story doing the rounds claims German media giant Bertelsmann is looking for suitable acquisitions. City speculators asked themselves if it could be a buyer of part of BSkyB's 18% stake in ITV as the prelude to a full bid. BSkyB firmed 4¾p to 460¾p.

It's not the benefit of swingeing price increases that is likely to drive shares of our major utility suppliers higher in the months ahead, but takeover activity. Some of the valuations that are now being applied to the likes of nuclear power generator British Energy, down 9p at 717p, have given the City something to think about.

At least, that is the conclusion of Goldman Sachs, which has decided to increase the price targets of a dozen major players in the European utilities sector.

Among the UK companies getting the seal of approval from Goldman is International Power, 10¼p firmer at 399p, which has been taken off the broker's conviction sell list and awarded a neutral rating, with its target raised from 389p to 431p. It has also raised water supplier Pennon, down 4p to 633p, from sell to neutral.

But United Utilities, off 3½p at 717½p, has been downgraded from neutral to sell along with Severn Trent, 30p adrift at 1375p, because their shares already discount any takeover action. National Grid, down 2½p at 729p, has replaced International Power on Goldman's conviction sell list with its target slashed from 728p to 648p.

National Grid already trades at a substantial premium to other UK and US peers and, according to Goldman, there is little prospect of anyone bidding for it.

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Tomorrow's agenda

Beleaguered buy-to-let lender Bradford & Bingley will hope to draw a line under a dire start to the year when it publishes results for the first six months. The catalogue of disasters that have afflicted the bank include the resignation of chief executive Steven Crawshaw due to illness, three stabs at a shambolic rights issue and a bailout by its rival banks. Analysts predict B&B will plunge into the red and report mounting bad debts, outlining the challenge facing new chief executive Richard Pym.

With the housing market in a miserable state, the City is likely to focus on the decline in Rightmove's estate-agent customer base when the property website reports first-half results. Investors will, meanwhile, be quizzing the company over the likely impact of increased competition on advertising sales after the Association of Estate Agents last week announced plans to launch a free property-listing website in October.