Market Report: BA flies to five-year high on talk of Emirates bid

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The Independent Online

British Airways may be facing the consequences of an investigation into anti-trust allegations in the US but some traders still believe the company could receive a takeover bid from Emirates Airlines before the results are made public.

Reports that Emirates has officially denied being interested in BA did nothing to dampen the market's enthusiasm for the stock, sending the shares to a five-year high of 377p early in yesterday's session. Not everyone believes the story though, with several traders pointing to the ongoing case in the US as being one very significant obstacle to any kind of deal being struck. By the close, the shares had succumbed to a bout of profit-taking to end 11p better at 368.25p.

Weak copper prices obscured strong results from the Indian mining group Vedanta Resources, 14p weaker at 1,302p, as the group reported a 113 per cent rise in first-quarter revenue. The heavyweight brokers Morgan Stanley, Merrill Lynch and UBS all advised their clients to buy the shares, while Citigroup raised its price target to 2,200p. Elsewhere among mining stocks, copper producers suffered along with Vedanta, with Kazakhmys down 15p to 1,173p and Antofagasta 4p weaker at 409p.

A mixed group of numbers on Wall Street contributed to a London session that was short on direction and low on volume. The FTSE 100 closed 7.1 worse at 5770.9, as the weaker mining and oil sectors offset a strong support services sector, boosted by sparkling results from Capita, which ended the session as the best performing blue-chip stock after hitting an all-time high closing price of 518.75p, 44p better.

Second-quarter results from the internet casino group PartyGaming today look like being completely overshadowed by the ongoing crisis in the industry after the arrest of BetonSports' chief executive. Consensus forecasts are for $310.5m in revenues, and given the current situation if the company misses its numbers many traders expect to see the shares take another hammering. The shares fell another 7p to 87.25p, while its rival 888 Holdings dropped another 16.75p to 161p.

Volume has been particularly heavy in the intellectual property group BTG, with traders speculating that a bid could be coming at 145p per share, valuing the business at £213m. The stock has been a story of jam tomorrow for several years, with its much-hyped varicose vein treatment Varisolve seeming to be no nearer coming to the market. Traders said investors would be open to an offer, particularly if it meant a partner could be found for Phase II US trials of the treatment. The shares closed 1.25p firmer at 119.75p.

Another bid story that first did the rounds a couple of weeks ago found fresh support. Enterprise, the provider of outsourcing maintenance services to utilities and local authorities, is thought to be a target for several private equity firms, and the word in the market was that the bidder could be Macquarie Bank, the acquisitive Australian investment bank. The shares were well bid all session, and closed at 440p, a gain of 14p, amid revived talk that a bid will come at 525p per share.

In the small caps, Empyrean Energy gave investors discouraging news from test results at its Glantal Gas project in Germany. Two out of three tests showed water rather than gas at the site and, despite plans for a third test, investors decided the news was enough for them to cut losses. The group still has ongoing projects in California and Mexico, and some market-makers said the selling looked overdone as the shares closed down 19.5p at 58.5p.

The online auction group QXL Ricardo may have been the best performing share in the UK market last year but it is still not one for the faint-hearted. Only 3,851 shares changed hands yesterday but the stock traded as low as 7,726p and as high as 8,875p. Wednesday's trading update does not look to have been good enough to tempt many buyers into the shares, which ended 361p lower at 8,492p.

Another stock that has had a bumpy ride recently is Brinkley Mining, although at least the shares started moving in the right direction yesterday. The group is thought to have changed nominated adviser from Beaumont Cornish, heavily criticised by some traders when it floated in June, to Arbuthnot Securities. The shares improved 2.25p to close at 23p.

Finally, the small-cap chip stock IQE gave the market a solid trading update as the shares closed a penny better at 15.75p. The group expects a 50 per cent rise in first half sales to £14.5m and confirmed the acquisition of US rival EMD for $16m. Its house broker Evolution Securities is confident the group will achieve break-even earnings this year and reiterated its "buy" recommendation on the shares, with a price target of 20p.