Market Report: HBOS homes in on housebuilder Quintain

Even a stopped watch is right twice a day. After months of fevered speculation ringing hollow, Quintain Estates & Development yesterday moved a step closer to a deal, with HBOS backed to launch a takeover. The banking group, which has been targeting the housebuilding sector in the past 12 months, bought a 12 per cent stake in Quintain. It carried out the transaction through a contract for difference, with a rumoured price of 927p per share, 8 per cent higher than the closing price on Thursday.

Market-makers were backing HBOS to launch a full takeover yesterday "at anywhere above 927p", and said it would probably bring in a partner to bolster the move. The name mooted was Grosvenor Land Brokerage. The bank has also partnered with property tycoon Sir Tom Hunter, the fly in Tesco's ointment as he attempts to derail the supermarket's proposed takeover of Dobbies Garden Centres. HBOS ended 11p up on the news while Quintain finished the day among the highest risers on the mid tier, up 40.5p at 895.5p.

Confidence was high in the property sector after Quintain's news coupled with a bullish trading update from British Land, which ended up 18p at 1,381p.

Investors also got excited about Derwent London, a second-line real estate stock, after it sold £175m-worth of non-core assets, related to its deal with London Merchant Securities earlier this year. The company, which has shed almost £4 off the share price since April in line with the sector, rallied off the news and closed up 21p at 1,792p. London was bullish after the Dow Jones index closed on record highs on Thursday. The FTSE 100 was up 56.4 points in early morning trading although closed 19 points up at 67,16.7. The US market continued its upward trend, while Asia performed strongly pushed by takeover speculation and easing fears over US consumers. In the UK financial services firms were also strong.

Cigarette maker BAT was a little wheezy, despite backing from JP Morgan; it closed down 6p at 1,664p. The broker had put out a bullish note on the global tobacco sector, but singled out British American for its "robust long-term growth prospects" and upped its share target to 1,850p.

Sage Group reacted quickly to news its head of health care had resigned, reassuring the market that the division's operations were in line this year. It ended up 1.75p up at 239.75p.

On the second tier, Britvic was among the highest fallers after Altium Securities released a bearish note on the soft-drinks sector an unusually wet summer in the UK. While Britvic should benefit from its cost-cutting programme, it said, "this may not be sufficient for to offset what we suspect is a challenging trading environment". The drinks group finished 2.93 per cent lower at 352.25p.

Traders deserted Electrocomponents, despite a solid interims statement. After strong early trading, it closed down 5p at 262.75p, despite backing from Collins Stewart. The market refused to bite after the broker said the company had left its April weaknesses behind.

Confidence did return at Aegis Group, which reversed a month-long decline. Broker reports that the company is set to unveil a contract from Johnson & Johnson, are understood to carry weight, and it closed up 5.5p at 141.5p.

Topps Tiles was unable to turn broker backing into shareholder value. Seymour Pierce reiterated its "buy" rating on the stock saying it had been "unfairly walloped by the market with it being in the household goods sub-sector". The tile and wood flooring specialist still closed down 2.25p to 227p.

The lights were going out at Renewable Power & Light on the growth market. The green energy group resumed trading after voluntary suspension last week on the back of its main supplier defaulting. The shareprice tanked by two-thirds, closing at 38.75p.

X-ray metrology group Bede has taken a hammering in the markets since listing at 101p in July 2002. A brief rally three years later couldn't mask the problems and Bede reached its nadir at 4p last month. The share price spiked yesterday morning by half and the company released a statement that it was in talks with an unnamed bidder. The stock closed at 6.75p.

Traders were scratching their heads over mobile phone recycling company Fonebak. There was some aggressive buying throughout the day, driving it to become one of the top risers outside the FTSE 350, but no one could work out why. One said: "We think there must be a story somewhere on the internet. We just haven't found it yet." The stock closed up 34p at 92.5p.