Bid speculation buoys Scottish & Newcastle

Traders chasing the next likely mergers and acquisitions candidates, after the approval of Allied Domecq's takeover by Pernod Ricard, alighted on S&N, arguing its size, as a relatively small player in the global brewing industry, would make it easy enough for a bigger player to down. Carlsberg, its joint-venture partner in the growing Russian market, was tipped as a bidder yesterday, but so was private equity.

The stock hit its highest level since November 2002, up 21p to 488.5p in three times the usual volume.

Goldman Sachs threw its considerable trading weight behind a new investigation of the engineering sector from its respected analyst, Charles Burrows, yesterday, sending shares in a raft of manufacturers soaring. Mr Burrows' thesis is that with industrial investment and infrastructure building in China supporting demand, engineering companies are going to enjoy sales considerably higher than the market is expecting.

There was three times the usual volume of trading in shares of FKI, the diversified engineer whose products include conveyor belts, hoists and door handles. It jumped 7.5p, or 8 per cent, to 103p, its best performance since 2003, after Mr Burrows turned positive on the shares. And Invensys, the cash-strapped power-systems group, was 0.75p stronger at 11.75p after Mr Burrows abandoned his negative stance and predicted sales growth next year thanks to improvement in some of its markets.

Traders scrambled to keep up with orders for other stocks tipped in the 96-page tome. These were Weir -, the Scottish pumps maker, up 4.75p at 326.75p - and Bodycote International, which jumped 8.25p at 181p.

Combined with the excitement over the Olympic bid victory, which sent a raft of construction stocks higher, the FTSE 250 of mid-cap stocks, where the engineers are concentrated, ended the day at a record 7,496.9, up 89.5.

The FTSE 100, meanwhile, enjoyed its seventh consecutive positive session at 5,229.6, up 39.5. It was again buoyed by the oil sector, as the price of crude rose back above $60 a barrel. Shares in BP, the UK's biggest company, were up 7.5p at 630p and Shell rose 5p to 568.75p, its best level since before the 11 September, 2001, terrorist attacks.

Most of the significant fallers in the FTSE 100 were the result of stocks starting trading without the benefits of their latest dividend. But of the remainder, William Morrison Supermarkets, down 3p to 181.5p, stood out amid talk that trading and profitability is continuing to deteriorate. And the outsourcing giant Capita fell 3p to 363p on reports that the Government is planning to scrap its proposed lorry-charging scheme. That is one less lucrative contract that Capita, which runs London's congestion charge, could bid for.

March Networks, the hi-tech security company chaired by Sir Terence Matthews, the Welsh entrepreneur, was 32.5p better at a record 642.5p on rumours of a £5.5m contract win in Canada. And Halfords shares were up a ha'penny to 290p in the hope of a bullish statement at the annual shareholder meeting on 13 July.

Vernalis, the former British Biotech, closed flat at 63.5p after an earlier boost from news of an acquisition. It is buying Cambridge-based Ionix Pharmaceuticals for up to £17.5m, to get its hands on an experimental painkiller nasal spray which Ionix is developing with the FTSE 100 consumer goods giant Reckitt Benckiser, down 7p at 1,619p. The news release failed to mention that Ionix is chaired by Peter Fellner, the executive chairman of Vernalis, although the company insisted that he had taken no part in the negotiations and does not own Ionix shares.

Sound Oil, a cash shell which raised £11m last month to invest in natural resources projects in North and West Africa, saw its shares rise another penny to 8.75p, compared with their placing price of 5p. Yesterday, gossips heard that Hichens, Harrison & Co, Sound's broker, was steering its clients into the stock. Hichens, Harrison, by the way, has also fared well since its recent flotation. At 83.5p yesterday, it is up 67 per cent from its May placing price.

MKM Group, an organiser of special offers on behalf of newspapers, said its founders had given it £350,000 to plug a financial hole until a £1m placing it hopes to tie up by the end of the month. Its stock was unchanged at 6p, despite news it had settled a legal dispute with Express Newspapers over a botched cruises promotion, with investors preferring to wait for the refinancing.

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