Market Report: Regal rises on talk of return by Shell with full bid

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After last month's extraordinary "deal then no deal" between Royal Dutch Shell and Regal Petroleum, the gossips were talking up the possibility of the oil major making a full bid for Regal.

Two weeks ago, Shell agreed to buy into Regal's Ukrainian gas fields, but pulled out after the smaller company replaced its chief executive and chairman the next day. One trader said: "There is talk that Shell is back, but this time wants all of Regal. Its shares have risen and will rise further." Shell closed down 30p at 1922p, while Regal was up 14.75p to 163p.

The only other scurrilous rumour in the afternoon was of a potential management buyout of Barratt Developments. The shares rose 0.81 per cent to 469p as a result, but traders were sceptical.

Worst performer was Northern Rock after talk of unrest among backers of Virgin's takeover bid. The group slumped 7.63 per cent to 109p, on reports that Deutsche Bank could walk away from backing the preferred bid.

Another poor performer was Mitchells & Butlers after Numis slashed itstarget price from 638p to 581p. The pub group fell5.29 per cent to 558p.

Weak broker sentiment also did for Standard Chartered, which ended 2.4 per cent lower at 1868p. UBS downgraded the stock to "neutral" from "buy," after its strong recent performance.

There was a bout of profit-taking in Tullow Oil. The group fell 2.91 per cent to 651.5p as investors locked in on its record levels of 671p from Friday.

The FTSE 100 was unable to hold last week's rises yesterday and fell 45.9 points to 6,386.6 at the close.

As the top tier slid, investors indulged in some retail therapy. Home Retail Group topped the table in the morning and closed 3.17 per cent up at 358p. It was overtaken by Kingfisher at the end of the day, itself up 3.94 per cent at 158.3p.

Taxiing down the runway was British Airways, 0.73 per cent higher at 343.75p after support from Collins Stewart. The broker reiterated its "buy" rating and said BA and Air France-KLM were its pick of the European airlines. BA is also set to release traffic numbers tomorrow.

One financial stock that avoided the sell-off was Royal Bank of Scotland, which strengthened 4.5p to 463.5p. The European Commission cleared its $1.35bn (654m) purchase of a 51 per cent stake in Sempra Energy's energy trading business, and the market is also preparing for a trading update on Thursday.

Elsewhere, WPP Group rose 17p as it landed a lush contract with Dell, the computer company. Panmure Gordon said it was an important win that could add 50m a year to the agency's revenue. "It should bolster sentiment, which has been weak," it added. WPP retreated with the market to close 1p up at 615p.

Topping the mid-tier was Rank Group after it confirmed that Genting International, the gaming group owned by one of Malaysia's richest families, had taken an almost 10 per cent stake. Daniel Stewart released a note with a "sell" rating, however, saying the chances of a full bid had risen but there was still risk attached to investing in the stock.

One company that stormed up late in the day was PV Crystalox Solar, which closed 6.19 per cent stronger at 120p. Investors gave the silicon wafer group a pat on the back as it announced that pre-tax profits for the full year should be ahead of its expectations.

The same could not be said of Morgan Crucible. The industrial ceramics group was smashed by almost a quarter to 200.25p after announcing a disappointing trading statement. It revealed currency movements would hit profits by 6m and second-half revenue momentum was more moderate than the first.

The small-cap fallers were also led down by disappointing updates. Worst of the day was Regent Inns, which fell over 41.52 per cent to 25p. The group said that changing consumer patterns, increased competition and England's failure to qualify for the European Championships mean it is unlikely to achieve growth in pre-tax profits in the financial year. Clapham House also found itself down 39.64 per cent to 150p on a profits warning.

Photo-Me International fell 1p to 39p after the departure of chief executive Serge Crasnianski, flagged earlier this year. One trader said: "You would have expected the stock to rise on the news. I can see no rationale to be long here." He added that the market could fear Mr Crasnianski placing his 19 per cent stake in the group.

One solid riser was Symphony Environmental Technologies, after the ethical fund manager Hunter Hall agreed to take a 19.13 per cent in the group via a placing. The stock rose 39.14 per cent to 4p.

Visual Defence, the security company, was up 18.64 per cent to 17.5p after it won a contract with an unnamed African country worth up to $250m over25 years.