Market Report: Unilever squeezed higher amid Colgate bid talk

Unilever was the pick of the blue chips yesterday as the markets once more talked up its prospects of a takeover. The spectre of private equity has never been far behind the consumer goods manufacturer, but traders were now saying a US rival, Colgate-Palmolive, was the name in the frame for a tie-up. Reports of a private equity bid have receded, as a company with a market cap of more than £20bn could prove too rich a taste with the current uncertainty surrounding the debt markets.

The whole sector was awash with consolidation chat following Danone's €12.3bn (£8.3bn) takeover of Numico, which was announced after the market closed on Monday. Another potential driver behind Unilever finishing top of the leaderboard, market observers said, was the chance of enticing Numico's management, who will leave when the merger with its French rival is complete. Unilever finished up 31p at 1,647p.

It turned out to be one of the few shining lights on a poor day for the FTSE 100, which gave back all of the previous day's gains in early trading. One market maker speculated that investors were locking in their profits for the summer.

The initial decline snowballed in the afternoon, with a bad start in the US, and the top tier ended 81.8 down at 6,630.9. Rising oil prices and continued fears over interest rates played on investors' minds. The largest hit were the miners, which reversed the previous day's gains due to falling metal prices and a bout of profit-taking. The groups that really received the shaft were Lonmin, down 157p to 4,154p, and BHP Billiton, which topped the blue-chip fallers, sinking 60p to 1,483p. One market trader called for calm: "This is just natural volatility in the market - there is no need for panic. The forecast is still good."

One surprise high-flyer in the top tier was Marks & Spencer, which rose 16.5p to 649p after releasing its first-quarter figures, boosting the sector. It has been a gloomy month for the food and clothing retailer, whose share price had taken a hammering on reports June's unusually wet weather had hit sales. Traders suggested the impact of the rain had been factored in, while some of the rise was a result of short selling. It seems M&S boss Stuart Rose was right, just. Weather really is for wimps.

Steaming in at the top of the mid tier was Arriva Group, after it bagged the right to operate the Cross Country rail franchise, beating Virgin. The rail operator finished up 7.9 per cent at 770p.

Another stock buoyed by a contract win was Aggreko, although that had dissipated by the close. The power and rental group landed the contract as exclusive temporary power supplier to the Olympics in Beijing next year, sending its shares up 18p. Despite backing from Panmure Gordon, which said the win could be worth £30m in revenues, the stock softened to close 1.5p down at 588p.

The FTSE 250 took the lead from the top and fell 127.5 to 11,732.1. There were casualties across the index, with property groups especially taking a hit. The biggest faller was Assura Group, which ended 6.1 per cent down at 193p.

That sinking feeling was also felt at Raymarine, the navigation equipment firm, which has performed 22 per cent lower than the FTSE All Share index this year. Its share price has staggered from an all-time high of 490p in April when it issued a profit warning relating to its US business. It fell a further 19.25p to 380p after a downgrade from Panmure Gordon.

On the growth market, Wadharma Investments doubled on its first day back from voluntary suspension. This followed the announcement it had agreed a reverse takeover of Kiwara Resources, a mining group that drills for uranium in Zambia. Investors backed the plan by Wadharma, which should have resumed trading on Friday but was delayed by stock exchange red-tape, to raise £1.2m through a placement.

The Kyrgyzstan gold miner Palladex has had a tough time over the past few years, and the first day of its new life as Minerva Resources didn't go quite to plan. While it finished the day up 11 per cent, a problem with the ticker meant that it remained trading under its former name. Last night the problem seemed to be resolved and Minerva can really look to the future of rebuilding its shareholder value.

Meanwhile, the market is anxiously waiting on the AIM debut of China Real Estate Opportunities today. The Asian property company is set to raise about £260m in a flotation run by Teather & Greenwood, with market makers predicting a decent premium on opening.