Market Report: Investors seek sanctuary in housebuilders

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The Independent Online

As the market crumbled in late trading, investors found sanctuary in the housebuilders, boosted by talkof a prospective bid for Redrow.

There was chatter of a 500p-per share offer doing the rounds, with Persimmon the name linked.

Traders said Redrow was previously considered a target about six months ago. One added that the shares have come off considerably since then, possibly reigniting interest from potential suitors. It stormed up 34.75p in the morning, although retreated with the market, closing 11.25p up at 383p. Persimmon strengthened 1.15 per cent to 971p.

The housebuilders had been smashed on Thursday by a Cazenove note, but support from Merrill Lynch boosted the sector yesterday. Barratt Developments led the way up to close 1.29 per cent higher at 667p.

Further takeover developments saw Resolution close the day as best performer, up 1.98 per cent to 721p. The insurer yesterday rejected a discounted 691p per share bid from Pearl Group.

Elsewhere in the sector, reports in Italy of a bid by Generali for Aviva sent the UK group up 9.5p. It fell by the end of the day, closing 3.5p lower at 697p.

Tate & Lyle had therumour mongers indulging their sweet tooth in the morning, with vague talk of interest in the group sending it 17p higher. Shares in the confectioner, which were smashed by a profit warning two weeks ago, ended 4.5p up at 453.25p.

The markets were tentative after the previous day's sell-off, and the FTSE 100 settled 4 points lower at midday. It went into a tailspin after a lousy performance on Wall Street, driven by oil fears. The Dow slumped 193 points in the morning, exacerbated by poor numbers from Wachovia. One trader said: "It's a nice 20th anniversary drop to keep the oldies wallowing in nostalgia for Black Monday."

The advertising giant WPP Group was among the worst performers after a disappointing third quarter results statement. It reported revenue growth slightly behind broker consensus and shed 4.18 per cent to 665p.

Northern Rock was the lowest by the end of the day after the chairman, Matt Ridley, fell on his sword. The lender gave up 8.68 per cent to 186.75p on the news.

The retailer Kingfisher has endured an abysmal summer, and its mini-rally in October was brought to a halt yesterday as Société Gé*érale and UBS cut their price targets. It closed 6p down at 170.7p.

On the second tier, movement continued in Alfred McAlpine, which rose 3.54 per cent to 555p, as Carillion stormed closer to a takeover. The suitor said it had non-binding letters of interest for 14.89 per cent of its prey from Schroder Investment Management and New Star Asset Management. McAlpine wasn't too chuffed by the news. It said it was "disappointed", and continues to believe the 570p-per share bid undervalues the group. Carillion fell 7p to 384.5p.

It has been a strong week for Ashtead Group, which topped the mid-cap risers in the morning. The equipment hire group has enjoyed support from ABN Amro and Dresdner Kleinwort this week as well as vague takeover talk. The bulletin boards have continued to buzz since. Nick Brown, sales trader at Evolution Securities, said: "People realise the stock is very, very cheap. It has all the attractions a leveraged buyout group would want."

Worst performer on the second tier was Paragon Group, giving up 7.41 per cent to close at 250p. It was dragged lower by the troubles at Northern Rock.

Outside the FTSE 350, Instore traded well, rising 24.14 per cent to 9p on the back of its interim results statement. The group, which owns Poundstretcher, reduced pre-tax losses by more than half to £5.3m and made bullish noises about its future.

Umbro continued up, strengthening a further 13.07 per cent to 173p with strong volumes, as speculation firmed that the bidder was indeed Nike. JJB Sports was also believed to have bought a 10 per cent stake in Umbro yesterday.

Shares in Braemore Resources have doubled in the past two months and on Tuesday it announced its first production of platinum group metals. It was up a further 0.75p to 14.5p yesterday and traders are tipping it to go far.

Another mining stock backed by the investors was International Ferro Metals, up 5.5p to 105p. One said: "It is now in recovery mode and the market is waking up to the fact it's cheap."

Not so good for William Ransom & Son, which warned on profits ahead of its interim results. It said the results would be "substantially" below last year, sending it spiralling 24.68 per cent to 29p.

AIM rival Plus Markets fell on its return to trading after pulling out of takeover talks. The collapse of the deal, believed to be with the banking-backed trading platform Project Turquoise, sent the shares down 10 per cent to 25p.