Market Report: MOL the new name in frame for Premier Oil bid

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The Independent Online

Although the cynical observer might say that talk of a bid for Premier Oil has been so regular it is bound to be correct eventually, at least this time punters had a name and a potential price to get stuck into.

The word is that the Hungarian group MOL is mulling a bid for Premier at 1,500p per share, and given the appetite for producing mid-cap oil stocks, a bidding war could be on the cards. But the company has been in the frame for a bid for what seems like an age, and did in fact receive an offer almost exactly a year ago although that did not lead to a formal bid. MOL is a new name in the frame and that always gets punters interested, helping the shares to climb 53p to 1,235p. Other oil stocks were also in favour – Imperial Energy rallied another 18p to 1,246p and Dana Petroleum climbed 12p to 1,267p as broker ABN Amro upgraded its stance on mid cap oils following a review of the sector.

The reassuring trading update from Barclays, up 27p at 524p, got bargain hunters looking at the banks. Royal Bank of Scotland, off something close to 40 per cent this year, closed 9.25p firmer at 422.25p, while Standard Chartered, the only major UK bank to have escaped the subprime crisis, added another 36p to 1,725p. The latter's shares are actually up 16.6 per cent this year, a remarkable performance given the bloodbath across the global banking industry.

Monday's bid speculation surrounding Punch Taverns and Mitchells & Butlers continued to play out, as Punch denied that it is in talks over a deal worth potentially £5bn and including something like 11,000 pubs and bars. The official denial sent shares in Punch 24.5p lower to 820.5p, although M&B fared far better, albeit remaining unchanged by the close at 608.5p.

Sugar and discount fashion group Associated British Foods was among the main casualties as broker UBS cut its target price for the shares and its rating to "neutral" from "buy". The broker highlighted the weaker US dollar as its main concern, even though it still anticipates strong performance at Primark, the clothing chain. UBS cut its target to 955p, sending the shares down 19p by the close to 862p.

Prudential, 8p worse at 624p, was also suffering from a broker-induced hangover as Panmure Gordon slashed its target price for the shares from 915p to 850p, even though it maintained its "buy" stance.

The broker believes that the company could buck the expected quiet newsflow in the run-up to Christmas but cut its target price to reflect the possibility of a recession.

Another bad day for traders was improved by a stronger start to the session on Wall Street as the Dow saw triple-digit gains by early afternoon. However, US buying was not enough to drive London shares into positive territory and the FTSE 100 closed 39.8 lower at 6,140.7.

The-side effects of the credit crunch are being felt beyond the banking sector – Pendragon, the car dealership, gave investors a grim unscheduled trading update, warning that profits for the full year will be at least £12m below forecasts. The company blamed wild fires in California, lower margins and economic uncertainty, but the market was in no mood to forgive. Its shares slumped 18.75p to close at 35.5p, a fall of 34.6 per cent, and have now lost more than 70 per cent since April.

Recruitment stocks, always among the first to suffer when investors fear a recession, were out of favour again as the wider market staged yet another big sell-off. Michael Page, whose directors bought more than £1.2m worth of stock at the end of last week, gave all of their gains back to close down 17p at 281p, while SThree shed 13p to 198p, the first time the shares have fallen below 200p since just days after it listed.

Abacus, the electrical components distributor reported encouraging signs despite difficult market conditions in its full-year results. The group reported a pre-tax profit of £0.6m compared to a loss of £0.1m in 2006 and maintained its market share. Abacus shares rose 12p to close at 71p.

The AIM-listed Broker Network Holdings, a speciality insurance provider, saw its shares climb 69.5p to 592p after it reached an agreement with Towergate Partnership on its takeover. Towergate will pay 605p per share in cash, valuing the company at £95m.

Hip Cricket enjoyed a decent start to life as a publicly listed company, following a placing at 262p. The mobile marketing company raised £8.3m in the placing, organised by the broker Collins Stewart, and by the close the shares had risen to 270.5p.

Finally, investors will be on the look-out for e-Therapeutics as the Newcastle based drug discovery group lists on Aim. The company hopes to raise £1.3m of new capital at 67p per share giving the group an initial value of £37m.