Market Report: International Power boosted by takeover tales

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The Independent Online

International Power was one of only a handful of bright spots in an otherwise forgettable day for London shares. The word in the market is that now that the German utility RWE has found a buyer for Thames Water it may turn its attention to International Power.

Takeover stories have done the rounds at International Power a couple of times in recent weeks, with the US giant General Electric widely tipped as a possible bidder. The stock has benefited from the disastrous cracked pipes news from British Energy on Monday, with investors switching out of the nuclear power plant operator into other sector players. However, not everyone believes that a bid will come. One trader said: "The ink isn't even dry on the Thames Water sale, and German companies are not exactly known for being gung-ho with their cash. RWE might bid for another UK utility, but it won't be for a while yet." International Power added 3.5p to close at 342p, one of the best performers in a weak blue chip index.

British Energy itself topped the leaderboard with a 23p rise to 450p after JP Morgan told clients that the shares are a "risky trading buy". The company is likely to drop out of the FTSE 100 at the next reshuffle, due in December, unless the share price stages a much longer rally. The asset management group Schroders, worth approximately £430m more than British Energy, is the favourite for promotion despite yesterday's 30p fall to 977p.

London shares were sharply lower after a couple of major takeover bids came in at significantly less than investors had been hoping, dragging the FTSE 100 63.8 lower to 6108.6. Tata Steel made its offer for Corus Group, but the 455p per share offer is almost 100p less than rumours had indicated, while the Thames Water price tag was almost £2bn less than the highest reported offer. Corus closed half a penny worse at 479p as some traders decided to take what the market was offering and run.

Banking stocks, worth about 20 per cent of the index, were also hit hard as a bout of profit-taking hit the sector. Barclays was sharply lower, down 17.5p to 705p, on the shock news that the finance director, Naguib Kheraj, will leave the company next year. Lloyds TSB was also sharply lower, down 14.5p to 564.5p, as HSBC poured cold water on a sale of Scottish Widows by saying that the life assurance arm of the business is "critical" to the group's future. Standard Chartered, another strong gainer in recent sessions, gave back 31p to close at 1,407p.

The weaker markets and fading bid hopes hit the asset management sector hard, with Amvescap 23p worse at 591.5p and Man Group 7.25p lower at 460p. According to some charting traders, the blue chip index looks overbought in the short term and most are expecting more selling pressure over the next few sessions.

It wasn't all bad news for asset managers, as Ashmore Group entered its first day of unconditional dealing a week after coming to the market. It bucked the weak asset management sector by closing 7p better at 206p. Business was brisk for the highly rated emerging markets debt investor, with almost 12 million shares changing hands.

The soap maker PZ Cussons was again high on the list of mid cap movers, climbing 1.25p to 146p. The shares have always been among the most illiquid in the FTSE 250, but a 10 for 1 split three weeks ago should mean that the stock becomes less volatile. Before the split, single trades in either direction were enough to move the shares anything up to 10 per cent, "a ridiculous scenario for a company worth over £600m", according to one dealer.

Traders are hoping for some more good news from Accys Technology, an AIM-listed company that has proprietary technology that gives fast-growing softwoods hardwood properties in a fraction of the time it takes to grow in the wild. The word among traders is that another contract could be on the way for the group, which is now valued at €214m, although the company denied the rumours. The shares have been sharply higher in recent weeks and closed another €0.03 better at €1.65.

Brinkley Mining followed up on Monday's strong performance by announcing that it has secured initial prospecting licences for two uranium sites from the South African government. Investors will be heartened by the news after a difficult initial trading period since the shares floated in February. The stock firmed 0.25p to close at 20.5p.

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