Market Report: Rank storms ahead as investors bet on takeover

There was little enthusiasm for bid chat as the market turned into a sea of red, but a few traders were still twisting on the possibility of a bid for Rank Group.

The gaming company topped the mid-tier risers, storming up 7.56 per cent to close at 90p as investors bet that talk of interest from Ladbrokes and William Hill could prove solid.

Rank shares plummeted to 15-year lows last month after it warned on profits, and have continued to suffer until yesterday's welcome relief.

The market opened solidly, once more driven by the buzz around the prospective mega-merger between BHP Billiton and Rio Tinto. While Rio rejected BHP's advances on Thursday, it continued to soar on speculation of an improved offer. It topped the leaderboard at the close, 6.19 per cent higher at 5624p.

As the day wore on, the markets went into freefall as fears over the financial sector intensified. Reports of a £10bn write-down at Barclays sent shockwaves through the market, contributing to the FTSE 100 ending 77 lower at 6,304.9. The rumours sent Barclays tumbling so quickly that the stock was temporarily suspended. As the group came out with a full denial of the reports, it resumed trading and finished only 11.5p down at 474.5p.

After littering the fallers, the banks managed a slight rally and there was even talk that Alliance & Leicester could release some good news next week. It rose 39.5p in the morning, but weakened with the market to close 12p down at 659p.

Even the miners felt the squeeze, despite the Rio effect, with investors running to lock in profits as the market tumbled. Vedanta Resources was the worst performer of the day, down 7.3 per cent at 2044p.

There was a general weakness across the insurers, and Friends Provident gave up 7.18 per cent to close at 148.7p. UBS cut the group's target price from 210p to 175p to reflect "the short-term uncertainties faced by Friends". It added that the shares were not cheap in a sector context.

Extermination group Rentokil Initial was another on the slide, giving up 4.29 per cent to 158.5p after a downgrade from Exane BNP Paribas. The broker said that after its recent outperformance the stock "should cool down, at least in the short term, on cyclical issues and quieter corporate activity in the fourth quarter".

There were few winners on the top tier, but the sell-off failed to dent enthusiasm around the oil and gas company BG Group, which rose 1.62 per cent to 1005p to maintain its record run. The shares surged for a second day in a row after an oil discovery off the coast of Brazil. Credit Suisse upped the stock to "outperform" from "neutral" and raised its target price to 1100p from 925p.

Support from Goldman Sachs lifted British Energy Group, which had been in the doldrums after recent reactor outages. The powerhouse US broker added British Energy to its "conviction buy" list, saying the shares had been heavily discounted relative to the forward oil curve and its implied power prices. The stock rose 1.96 per cent to 521.5p.

The publisher Emap was up 33p in the morning as it said its review of the group structure remains on track, with interest in all divisions from trade and private equity buyers. The shares weakened to close 3p higher at 840p.

Also up was Durex-owner SSL International, which rose 2.64 per cent to 505p. This followed support from Goldman Sachs, which lifted its recommendation to "conviction buy".

At the other end, lowest on the mid tier was QXL Ricardo, which slumped 9.36 per cent to 1550p as investors took profits. The group had soared earlier this week when it admitted it had been approached by an unnamed suitor. Reports in Poland yesterday said the bidder was eBay.

The shares were short-circuiting in the tech group Misys yesterday as UBS downgraded it to "sell". The Swiss broker said Misys had outperformed its European peers recently, and warned that it could lose out on contracts as banks review their spending on IT. The stock fell 6.01 per cent to 223p.

Outside the FTSE 350, Tecteon soared 75 per cent to 1.05p as it announced a new direction for the company. Tecteon specialises in voice communication technology, including headsets and hands-free kits, but yesterday signalled a move into metals, following a joint venture with Zamcu. The tie-up involves the financing and off take of copper, zinc and lead for sale in China.

The beleaguered air conditioning group Worthington Nicholls received support in the wake of its extraordinary general meeting. It rose 29.87 per cent to 25p on news it was in discussions to hand the management over to Simon Beart, as proposed by certain shareholders. The stock has endured a tough year, sinking from a peak of 194p in May to as low as 18.75p last month.