Market Report: Bluebay in the swim on talk of JP Morgan interest

Out of market chaos comes opportunity. Two days after Bluebay Asset Management hit year lows, trading floors were buzzing with talk that the group was being eyed by one of international finance's big guns.

Chat that JP Morgan was interested in the alternative investment house swept the market in the afternoon, sending the stock 6.67 per cent higher to 355.5p.

One trader said: "It is certainly feasible that JP could be looking to diversify its asset management business. Bluebay's price also offers an opportunity."

The best performer on the main market was Johnson Matthey, as reports talked up a speculative bid from Dow Chemical. The group strengthened 5.34 per cent to 1,836p as traders backed the stories to have at least an element of truth.

Thursday proved plain sailing for the luxury cruise liner group Carnival as its fourth-quarter numbers beat expectations. The company posted net income of $358m (181m), sending the shares steaming 67p higher, although it drifted to close 28p up at 2,213p.

The market shook off its caution from earlier in the week, but the run-up to Christmas remained lethargic. The FTSE 100 closed up 61.1 at 6,345.6.

BSkyB was among the fallers, as investors sold into news that the Competition Commission had recommended it cut its ITV stake from 17.9 per cent to below 7.5 per cent. The broadcaster fell 1.15 per cent to 600p. ITV rose 1.6p to 84.4p.

Tullow Oil skidded to the bottom of the blue chips as the market reacted badly to a drilling update in Uganda. The exploration and production group announced the well flowed up to 1,100 barrels of oil a day, which was less than expected. It shed 3.08 per cent to 630p.

A bearish note from Citigroup weighed heavy on the housebuilders, with Persimmon the highest faller, down 12.5p to 777p. The broker cut its industry assumptions for the next two years "in light of the ongoing tight credit conditions and the softness in consumer confidence". Barratt Developments also retreated 1.34 per cent to 441p.

The pubs were looking tired and emotional after a JP Morgan report called time on the sector. It cut forecasts by an average of 5 per cent "to reflect growing caution about 2008". It added that the sector had surprised with its "savage de-rating" this year, after an average decline of 36 per cent. A downgrade to "underweight" had Marston's drowning its sorrows at the bottom of the mid-tier, down 2.74 per cent to 311p. Greene King also ended lower, off 1.23 per cent at 833p.

Sports Direct International's directors filled their boots yesterday, spending 2m buying shares. The retailer was the surprise top riser the previous day, despite reporting a 35 per cent drop in profits and was top again yesterday. It rose 13.12 per cent to 114.25p as the chief executive and the finance director each bought 1 million shares.

Investors backed smoke detector group Halma's acquisition of a German medical diagnostics group from Paragon Secondary Partners. The 55m deal helped boost the shares 4.75 per cent to 215p.

Kier Group also strengthened after announcing it was part of the consortium granted preferred bidder status for the 100m programme to build schools in Kent. The stock rose 11p to 1,414p.

On the small caps, the crisis-hit building services company Erinaceous Group received support, charging up 48 per cent to 3.7p on talk of yet another potential suitor. Reports said James Caan the entrepreneur rather than the legendary actor from The Godfather was sniffing around, having recently met with Erinaceous's advisers over a potential bid for all or part of the company.

Talking of movies, Contentfilm was lighting up traders' silver screens as it revealed it was weighing up the 20p-per-share offer from Peace Arch Entertainment. It rose 4.69 per cent to 16.75p.

Elsewhere, Encore Oil stormed up 16.56 per cent to 44p. The previous day Star Energy Group, with which it has a farm-in deal, recommended an increased offer from Petronas International.

Inspace shares had a stellar performance after it recommended a 183p-per-share offer from Willmott Dixon. The shares rocketed 7.25 per cent to 177.5p yesterday.

A little boost in the bedraggled housing market. Terrace Hill Group rose 8.33 per cent to 65p after a quick flip. It bought property in Hammersmith in November for 17m, only to sell it yesterday for 30.7m.

On the downside, Coal International was down 20.4 per cent to 19.5p as it reported that its full-year losses had widened from 8.1m to 12.4m.

Finally, the household products group McBride fell on a trading statement of its own. The company weakened 14.96 per cent to 103.75p as it warned on full-year profits following "unprecedented increases in the cost of raw materials".