Market Report: Spread betters push Pennon higher on bid talk

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The Independent Online

The age-old talk of a takeover bid for Pennon Group floated to the surface once more after the spread betters recorded huge volumes in the stock. Tongues were wagging after shares in the UK utility rose 28.5p following heavy early-morning trading. One market-maker said: "This is an old rumour. It has been around a long, long time and I'm not sure it's any more likely now." As the day wore on, investors became less enamoured with the speculation, and the stock closed up 12p at 607p.

The group's prize asset is its waste business, Viridor, according to one analyst. He added that should the rumoured private equity interest emerge, it was unlikely to target its water operation, South West Water.

Pennon's was hit particularly hard recently, possibly oversold during the market squeeze last week, the market maker said, adding: "It could also have been a bounce after a big seller cleared out."

Sector rival Severn Trent wasn't so lucky and closed down 12p at 1289p after it emerged that the water group faces a hefty fine. Ofwat, the water industry regulator, is expected to impose the fine after it failed to curb leaks.

Another stock that took a pasting from the spread betters, and subsequently the market, was Lloyds TSB. Simon Denham, managing director of Capital Spreads, said: "It has been surprising how short the investors are in Lloyds, they normally don't do this for single stocks." The stock was also hit by reports that potential bidders had dropped out of the race for its Abbey Life insurance business. It closed down 7p at 530p.

Top of the pile among the blue chips was the industrial conglomerate ICI as speculation mounted that Akzo Nobel would return to the table with a higher bid. Its 650p-per share offer was rejected yesterday, but reports suggested it could bring in a partner to up the bid. The maker of Dulux closed up 7 per cent at 618.5p.

Sector-wise, the miners were back with a bang, after a disappointing week. Vedanta Resources was the top riser after Merrill Lynch upped its target to £20, saying the company presented "compelling growth". It closed up over 5 per cent at 1701p.

Debt market fears continued to play upon the minds of investors in Cadbury Schweppes. The shares have been weakening since the June peak when it announced its decision to sell its US drinks arm. They dropped a further 8.5p at 595p yesterday following its decision to postpone the proposed sale.

The FTSE 100 was back in positive territory for much of the day as investors began buying again. Yet it was unable to shake off debt-market fears and ended up down 9 points at 6,206.

On the second line, Soco International enjoyed a surge in the afternoon to finish in the top three risers, as the oil and gas company announced a positive find in its Vietnam prospect. Teather & Greenwood analyst Tanya Clarke said if this is as substantial as it seems, Soco's share price could double to £30. "This is very good news and something the market has kind of missed," she said. It closed up 7.31 per cent at 1894p.

EasyJet continued its descent, after the broker UBS slashed its target price from 900p to 630p. It said the market was concerned over low-cost carriers' exposure to the UK, adding: "Yield has been weaker. The magnitude of the weakness will become clear on 31 July." Surprisingly the broker maintained its "buy" rating.

Mike Ashley's Sports Direct International had a brief respite yesterday from its sharp plunge since listing this year. This came despite the "publicity shy" tycoon unleashing a barrage of invective against City investors this weekend, calling them "cry babies" and said they were too focused on the company's share price. As the value of the sports retailer has halved in less than five months, investors would be forgiven a few tears, but the rallying call worked. The shares closed up 3.5p at 149.5p.

Infonic was another of the strongest performers with investors piling in after it said it was expecting to double its first-half revenues. The information management software group's estimate was up by half after stronger-than-expected trading.

One to watch tomorrow will be Epicure Qatar Equity Opportunities, which is being brought to AIM by Panmure Gordon. The fund was established to invest in quoted Qatari equities listed on the Doha Securities Market, and expects to raise $171m in London.

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