Market Report: Takeover talk helps Invensys engineer a rise

Takeover talk strengthened in the industrial controls and engineering group Invensys, helping it to avoid becoming a casualty of yesterday's mass market sell-off.

Invensys' shares spiked in early-morning trading, as talk circulated of a 450p-per-share bid from an unnamed suitor. It remains to be seen whether a bid would now be welcomed, but chief executive Ulf Henriksson pretty much welcomed offers after the company's full-year results in May.

On Wednesday, Invensys sold its process engineering business for £250m, sending its shares soaring. Landsbanki said the sale proves "deals are entirely possible in the industrial space". The stock, up 24p early on, closed 1.25p higher at 328.25p.

After the market avoided a shocker on Halloween, the bloodbath fell 24 hours later on All Hallows' day. After a cautious opening, it was smashed on rumours that Citigroup was set for a $10bn (£4.8bn) write-down. Wall Street slumped, shedding 215.4 to 13,713.8 in the morning. The FTSE 100 closed 135.5 lower at 6,586.1. One trader said: "The market was down on macro issues, although Citigroup was the main wobble."

Sentiment had already turned on the UK financials, with Northern Rock the worst performer on the day, down 6.52 per cent at 172p. It was followed by Barclays, off 5.38 per cent at 571.5p.

The medical device group Smith & Nephew was another bad faller, after succumbing to the curse of the in-line results. It reported revenues up from $679m in the third quarter last year to $845m this year, but fell 4.93 per cent to 617.5p.

The housebuilders were also looking shaky as fears over the state of the UK housing market intensified. The worst sector performer was Barratt Developments, which closed down 4.21 per cent at 625p.

B&Q owner Kingfisher was up in the morning as it revealed that the chief executive, Gerry Murphy, would stand down at the end of the financial year. Credit Suisse said the departure could spark the interest of potential predators. However, Kingfisher retreated with the markets, giving up 7.5p to 189.5p.

Top of the sparse list of blue-chip risers was Unilever, which managed a storming 4.37 per cent gain to 1,696p after its third-quarter results.

After profit-taking the previous day, the brokers threw their weight behind Schroders, sending it up 1p to 1,540p. Lehman Brothers and Citigroup upped their price targets, while Credit Suisse increased its rating to "neutral" on strong third-quarter results earlier in the week.

BG Group was another early riser after reporting third-quarter results. The chief executive refused to be drawn on talk of a potential takeover, but Citigroup said the results could reignite takeover talk. Last month, Shell, Petrobas, Gazprom and Exxon among others were rumoured as potential bidders. The results, with net income of £368m, beat consensus numbers by 4 per cent, pushing the shares up 15p, but they weakened to close down 8.5p at 881p.

There was further bid chat in Enodis, a good mover in a bad market. One trader said: "It feels right; it's just a question of timing." Enodis rose 5.75p to 215p.

One of the strongest mid-tier risers was Autonomy. The software group climbed 5.7 per cent to 1,063p following support from Merrill Lynch. The US broker raised its rating to "buy", saying it sees a 37 per cent compound annual growth rate, driven by the integration of Zantaz, the US group Autonomy bought earlier this year.

Investors continued to pile into PZ Cussons as the vague takeover rumours refused to fade. The soap and detergents group squirted up 2.31 per cent to 199.25p.

At the other end, Rank Group's woes continued. The company was hammered after warning on profits several weeks ago, but plateaued last week. However, it has failed to stop the rot, sinking a further 5.37 per cent to 97p.

Another faller was the financial services group Cattles as rumours of a placing hit the trading floors. Traders said Citigroup had placed 14 million shares at 327p. It fell 16.25p to 324.75p.

Imperial Energy Corporation, the oil producer, fell after it admitted an investor wanted to buy a quarter of the stock at a discount to the price. While it enjoyed a brief rally, the stock closed 23p down at 1,353p.

One standout stock amid the small caps was the telecoms minnow Spiritel as it landed a contract with Virgin Mobile. The group is to launch a directory enquiries service aimed at Virgin's 4 million customers. The stock closed up 52.4 per cent at 0.93p. Separately, a contract win with Gwynedd Council drove the green technology company TEG Group up 13.35 per cent to 91.25p.

On the downside, Domino's Pizza suffered over the rising costs of essential ingredients flour and cheese. Despite posting like-for-like sales up 14.2 per cent, the shares slumped 9.91 per cent to 216p.

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