Market Report: Insurers climb on bid chatter and job cuts

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The Independent Online

Once again the life insurance sector was strong after stories that the Italian insurance giant Generali is poised to make an offer for Aviva, 19.5p firmer at 744p continued to do the rounds. However,Prudential was the main beneficiary this time, as traders backed the group in the expectation that more corporate activity is around the corner.

Prudential shares added 17.5p to close at 566p, 20 per cent lower than the 708p Aviva offered the group in February. One trader said: "Either one of these companies could face a bid soon. The only thing stopping potential bidders is the jittery stage of global stock markets, but with things looking a little calmer now, the sector is very much in play."

Insurance stocks were also boosted by Royal & SunAlliance, which confirmed it was looking to make £70m of cost saving in the UK and £130m across its global operations over the next year. The figures were well ahead of market expectations and the shares were well bid, closing 3.5p firmer at 126.5p. Completing an excellent day for insurance investors, Legal & General also closed up, rising 3p to 125.75p.

Elsewhere in the blue-chip index, the recovery continued as the FTSE 100 closed 28.7 better at 5,626.1, although early trade had seen the index 68.3 better. Traders said there were still many nervous investors and most were happy to stay on the sidelines in spite of the stronger market.

Talk that the private equity giant Kohlberg Kravis Roberts is poised to bid for broadcaster ITV has done the rounds before, and attempts to revive the story attracted thin support. Bearish noises last week from the broker Goldman Sachs seems to have dented confidence in the story, although ITV shares nudged 2.5p firmer to close at 105.25p. With the outlook for television advertising revenue remaining weak, most traders believe if a bid comes it will not be at a knockout price.

An uninspiring trading update from Lloyds TSB failed to dent confidence across the banking sector despite good gains last week. Standard Chartered continued to attract speculative support, adding 11p to close at 1,296p, while Barclays firmed 5.5p to close at 605p. Most traders expect bid chat to resurface at Lloyds TSB, although the list of candidates to launch a bid is beginning to look exhausted, and the shares fell 3.5p to 523.5p.

The retirement home builder McCarthy & Stone was well bid, up 15p at 890p, as chat did the rounds that an offer will come for the group this week. It confirmed last Monday that it has entered discussions that may lead to an bid for the company, with Barclays Capital, Permira and Augustus Capital all thought to be planning one. The former has confirmed its interest and traders are betting a three-way bid battle could see the price rise to more than 920p per share.

A couple of upbeat broker notes initiating coverage of Debenhams, the department store that floated six weeks ago, did little to support the price, as investors continued to sell the stock on concerns over high street spending. The influential brokers Credit Suisse and Morgan Stanley have price targets of 220p and 230p respectively, but the shares declined 3 per cent, or 6p, to 190p. The fellow mid-cap retailer Matalan was also down 3 per cent, shedding 5.5p to 165.25p as investors booked profits after a speculative run at the end of last week.

121 Media continued its stellar performance so far in 2006, adding another 127.5p to close at 735p. The shares have performed wonders in the past six months, rising from less than 150p in February. A trading statement in April was full of confidence but traders will be relying on blockbuster numbers if the current valuation is to be justified.

An excellent drilling report from Equator Exploration's Nigerian operations, where independent reserve estimates were upped to 45 million barrels of oil and 730 billion cubic feet of gas, helped the stock add 5.5p to 115p. Some traders believe the market has been slow to appreciate the news and that the stock could go significantly higher in the coming weeks.

Interactive World, the mobile technology content provider, took another first step away from providing pornographic content by signing a deal with Probability Games, its first since listing in early May. Interactive will provide distribution for casino and card gambling games to mobile handsets using games provided by Probability. The stock, which is 65 per cent owned by the media tycoon David Sullivan, ticked 0.5p better to close at 87.5p.

Cardpoint shares took a pounding as traders moved to short the stock in the belief that offer talks would end. The shares lost 12.25p to 84.5p, and sure enough, confirmation came after the market shut. Bearish traders said the shares could fall much further today.