Market Report: Kingfisher flies high on rumours of US swoop

Interest is still focused on corporate activity, with the struggling home improvement retailer Kingfisher rallying 6.75p to 231.75p on the back of rumours the US DIY group Lowe's is poised to bid for the company.

The US giant is believed to be looking to appoint an experienced UK retail consultant to advise on European expansion, and traders believe it will consider buying Kingfisher, which runs the B&Q chain in the UK. Last week the company said like-for-like sales had dropped 9 per cent, but traders were relieved the fall was not worse.

BOC rallied 22p to 1,511p as reports swirled around the market about an agreed offer from its German suitor Linde this week. Some traders still hope for a counter-offer from the gases giant's French rival Air Liquide. One analyst said: "If the offer is agreed by the board of BOC then Air Liquide will have to dig deep to beat it, but there are compelling reasons for it to try to hijack the deal."

Traders also hoped for confirmation of an offer for the airports operator BAA from a consortium of bidders led by the Spanish construction group Ferro vial. The company is thought to have backing from a Canadian finance group and the Singaporean government, and traders said they expect the bid to come in at about 900p. BAA shares rallied 11.5p to close at 833.5p.

The FTSE 100 index of leading shares consolidated its position above the 5,800 level with a gain of 16.8 points to 5863, its highest level for four years. The gain was mainly down to strength in the heavyweight oil producersBP and Shell, as problems in Nigerian production led to a spike in the oil price. BP was up 12.5p to 668p; Shell climbed 15p to 1,888p.

After Friday's bid-inspired run on mining stocks there was some profit-taking last night, with Lonmin, the platinum miner, hardest hit, falling 58p to 2,613p, as Seymour Pierce recommended shareholders "take the money and run". The broker believes the bidder is the South African precious metals miner Gold Fields. In a note to clients, Seymour said: "With higher metal prices, but a stronger rand, our valuation is now 2360p. We do not see any others entering the fray given the complications of South Africa, and believe that the price is well above our postulated bid price."

It was a bad day all round for platinum-related stocks:Anglo American dropped 15p to 2130p as the broker Investec advised its clients to sell, and Aquarius Platinum fell 32p to 668p on valuation concerns.

Asset management companies remained in demand in the run-up to results from Schroders today. The stock market has had a good run since the start of the year, and traders expect a bullish statement from the former investment bank. Its shares were up 42.5p to 1172p - a four-year high - as its rivals Man Group and Amvescap also benefited from positive sentiment towards the sector. Man added 59p to 2,260p; Amvescap rallied 7.75p to 546.25p. Sticking with financials, Northern Rock, down 23.5p to 1,126.5p, gave back some of Friday's gains on talk of a bid from Bradford & Bingley, the mortgage bank. The broker Goldman Sachs downgraded Northern Rock to "in line" on valuation sparked by the latest round of bid rumours, maintaining its fair value price of 1,105p for the stock.

Among second-line stocks, EMI climbed a penny to 250p as derivative traders reported heavy volume of call options, indicating that someone thinks there may be a bid for the struggling entertainment group. Elsewhere, Game Group, the computer games retailer, tumbled 2.25p to 82.75p as investors worried about the impact of a delay in the launch of the Sony PlayStation 3 games console.

It was a good day to be in small CCTV stocks, as Quadnetics and Petards Group surged. Quadnetics rallied 27.5p to 260p, a gain of 11.3 per cent, as it said it expects a strong second half, and Petards joined in by issuing an encouraging trading statement as well as a contract win with Arriva. Its shares rose 0.12p to 0.97p.

Shares in Regal Petroleum climbed 19.25p after the company won the final appeal over the ownership of its Ukrainian assets. A Ukrainian rival had brought a legal challenge against the group, although analysts remain unconvinced the Ukrainian operations will lead to significant finds.

Due to unrest in Nigeria there was a quiet debut for the West African oil stock Equator Exploration, as it raised £147m through an institutional placing at 350p. Its shares closed at 355p, and when unconditional trading begins on Thursday the stock should have a market capitalisation of about £630m.

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