Market Report: Corus rises amid talk of a ThyssenKrupp link-up

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Bullish comments from a rival and the possibility of sector consolidation sent investors rushing to buy into Corus yesterday.

Bullish comments from a rival and the possibility of sector consolidation sent investors rushing to buy into Corus yesterday. Shares in the steel group closed 1.25p better at 53.5p thanks to record annual profits from ThyssenKrupp, the world's fifth-biggest steel producer. It boasted that its profits before tax had soared to almost €800m (£553m), up from €384m last year, and made some very bullish comments about prospects for the sector in 2005.

Also exciting the market was a hint from ThyssenKrupp's chief executive that consolidation of the industry may be on the way. At the world steel conference in Istanbul, Turkey, Ulrich Middelmann argued that the steel industry must continue to consolidate. "If the possibility exists, we would certainly think about a deal," he was reported as saying. Analysts suggested that a link-up between the German group and Corus would make sense.

Meanwhile, the FTSE 100 closed up 25 points at a 28-month high of 4,707. Dealers noted that the blue-chip index has now ended higher for three consecutive days and suggested that yesterday's close would have been even more impressive had it not been for a sudden spike in the oil price. The FTSE 250, however, fell 9 points to 6,391.6.

Bid speculation drove Man Group 47p higher to 1,296p. According to dealing room gossip, the hedge funds giant is being stalked by Merrill Lynch. The excitement in the sector follows the purchase of Highbridge Capital by JP Morgan last month and recent reports that Lehman Brothers is looking at buying the London-based hedge fund GLG Partners.

Scottish & Newcastle gave up 2p to 387.25p after bearish comments from ABN Amro. The Dutch broker initiated coverage of the brewer with a "reduce" recommendation and argued that S&N faces tough trading conditions in western Europe, weakening profit margins in Russia and it also questioned the sustainability of the group's dividends.

Big Food Group dropped 2p to 94.75p as investors become increasingly sceptical that Baugur, its biggest shareholder, will pay 110p a share to take the company private. When the Icelanders unveiled their indicative offer they reserved the right to offer a lower price for the BFG. Given the convenience food retailer has a pension fund deficit of £192m, debt of £250m and at present generates zero free cash flow, analysts believe such a scenario is quite likely.

Invensys jumped 1.5p to 13.75p as dealers reported a rush by bears of the stock to cover their short positions after a benign trading statement from the engineering conglomerate. Word has it the short position in the stock is sizeable, possibly as big as 8 per cent of the company's share capital.

Bears are believed to have targeted Invensys after ultra-negative investment notes from Dresdner Kleinwort Wasserstein and Merrill Lynch but were yesterday unsettled by a trading statement from the group which assured the market that it was on target to hit its forecasts. Dealers predict further short covering today. Meanwhile, the US fund management giant Wellington Management Company unveiled a maiden 3 per cent stake in Invensys.

Next fell 2p to 1,686p after the retailer's chief executive, Simon Wolfson, cashed in on the group's recent success via the sale of 13,000 shares at 1,684p each. The property director Andrew Varley sold a more modest 10,000 shares at the same price. Singer & Friedlander soared 12.75p to a new high for the year of 292.75p as investors bet that the financial services group's days as an independent player are numbered. A bid is most likely to come from the Icelandic bank Kaupthing Bunadarbanki, its largest shareholder, analysts say.

CeNes Pharmaceuticals fell 0.88p to 8.12p after unveiling a £10.5m fund raising at 7.5p. The biotech will use the cash to fund a second Phase III trial of its M6G post-operative pain relief drug along with other products in its pipe line. Wolfson Microelectronics was steady at 169p despite talk that the fast growing electronics group will issue a bullish trading statement.

Elsewhere, gossips talked of a fund raising from Imperial Energy, up 64.5p to 260.5p. Word has it the Russia-focused explorer is putting the finishing touches to a placing at 200p. ML Laboratories jumped 1p to 17.25p as a large seller was cleared from the market by brokers. David Kirch, the Jersey based millionaire, is whispered to have picked up some of the stock thereby adding to his 3 per cent holding. The clearance of a stock overhang also pushed Costain 1p higher to 37.25p while hopes of an upgrade by Peter Hambro of its gold reserves helped its stock 16.5p better to 472.5p.

Dealers were unsettled to see large selling of Reed Health, down 4.5p to 48p, ahead of tomorrow's full-year results from the staffing specialist. Reed Health has issued three profits warnings this year. Lawrence, the animal feed maker, gained 6p to 378.5p after its chairman, Peter Lawrence, sold 600,000 shares at 375p each.

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