Market Report: EMI goes up the charts on rumours of US bid

EMI has been the subject of numerous takeover rumours in recent sessions, mainly on the back of its poor performance over the past few years against a rising market. Even having the likes of Robbie Williams, Coldplay and Gorillaz on its roster has done little to cheer shareholders.

Takeover rumours did the rounds again yesterday, with more talk of a link-up with Warner Music, the recording division of the media giant Time Warner. However, dealers reported quality buyers piling into the stock as traders also speculated that Apple, the computing group that has revolutionised the music industry, may be considering an offer for EMI. Apple's iTunes is by a long way the market leader in music downloading but does not own any content. One trader said: "Media assets are out of favour with investors and have been for a long while, but there are definite signs the cycle may be turning."

EMI shares were well bid throughout the session and closed 6.5p better at 255p, on impressive volume of 32.4 million shares, much higher than treble the average daily volume of 10 million.

Another stock frequently mentioned in corporate activity dispatches is the brewer Scottish & Newcastle, which saw strong demand in late trade. A number of potential bidders have been named and the same names were on traders' lips yesterday - Carlsberg and Anheuser Busch, the group behind Budweiser. The stock traded up to a high of 547p, a rise of 30p, before profit-taking took some of the gloss off the shares. S&N closed at 544p, 27p better, and was the best performer in the FTSE 100.

After a shaky start London shares powered ahead in afternoon trade on the back of strong demand in the oil and mining sectors. Early losses were wiped out as the index closed 39.4 higher at 6044.1, the highest close since for five years.

First-quarter numbers from the integrated oil giant BP were no better than expected, but the positive sector sentiment sent the shares 10.5p better to 675p. Shell also benefited from the strong support for BP, and it added 26p to close at 1913p.

The Chilean copper mining group Antofagasta took its turn to lead the mining stocks higher, as it added 104p to close at 2,311p. Rio Tinto continued its strong recent run, closing 91p higher at 3,135p as the broker Merrill Lynch increased its target price in the stock to 3,950p. Merrill also increased its price target on the rival BHP Billiton to 1,400p as the world's largest integrated mining stock firmed 255p to 1,147p.

Vodafone, 1.75p firmer at 123.5p, also helped the large-caps index hit new highs as traders fuelled speculation that the group may be preparing to sell off its US operations, with Verizon mooted as the most likely buyer. Some traders believe there is lots of value left to be uncovered at a company that still trades at a significant discount to most sum-of-the-parts valuations.

On the downside, the mortgage bank Alliance & Leicester gave back 53p of its recent gains to close at 1,195p, as the stock traded ex a 34.7p dividend. After strong gains in recent weeks on the back of bid speculation, dealers also reported investors taking profits on the last day of the tax year. The rival Northern Rock, another star performer in the banking sector, also shed some of its recent gains, closing 19p lower at 1,146p. Most dealers blamed retail investors mopping up capital gains tax allowances before the end of the tax year for the selling pressure.

The highly rated chip stock CSR was the star performer in the FTSE 250 as it surged 93p to 1,247p. Market rumours said Apple is poised to launch a Bluetooth version of its iPod using CSR technology, and many traders feel CSR deserves to trade on a multiple higher than the current 25 times prospective 2006 earnings.

Also in demand was Shanks Group, up 11.75p to 190.25p, after upbeat comments from the chief executive Mike Averill at a Merrill Lynch renewable energy conference on Tuesday. Traders are also excited by the prospects for its Italian partner, Ecodeco, developers of a process that can turn 50 per cent of household waste into solid fuel.

The low-cost airline easyJet led the mid-caps lower as the Icelandic investor FL Group disposed of its 16.9 per cent stake, making a takeover of the group less likely in the short term. Dealers said the broker Cazenove was attempting to place the stock in the market, but added that progress was slow even as 158 million shares changed hands. EasyJet fell 31p to close at 327p.

Premier Direct, the online retailer of books and novelty items, was among the disasters of the day, shedding 20.3 per cent of its value. It blamed tough trading conditions for a drop in first-half profits and said full-year results would be below market expectations. The shares closed 33p weaker at 129.5p.