Market Report: US deal talk puts Lloyds back in bid spotlight

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The Independent Online

Despite the fact that the rumours have done the rounds countless times before, early talk that Bank of America is poised to make a bid for Lloyds TSB got traders excited, sending shares in the UK's fifth largest bank to 530.5p in early deals - a gain of 8.5p.

Takeover stories have been rife in the banking sector recently, but the Bank of America chat has come up often enough to make traders think there is no smoke without fire. One said: "Given its market capitalisation of just over £29bn, Lloyds is certainly in the frame for a bid. Since the acquisition of Scottish Widows in 1998 the group has consistently underperformed its peers and most shareholders would be willing to listen to offers."

Lloyds closed 1p firmer at 523p after profit-taking, but the rest of the banking sector was unable to attract much interest. Royal Bank of Scotland closed 8p firmer at 1,772p and HSBC added 2p to 947p, but with much of the City winding down before the bank holiday weekend enthusiasm was thin on the ground.

Investors will be expecting record results from the mining giant BHP Billiton today, but the broker Investec warned yesterday the world's largest integrated miner could disappoint when it comes to the size and scope of its next capital management programme. Analysts expect pre-tax profits to jump by 58 per cent. The shares closed up 6p at 1,056p, as break-up talk continued to attract buyers in Anglo American, 15p better at 2,470p.

Good results failed to create any buzz on another quiet August day in the markets. The blue-chip InterContinental Hotels and Persimmon comfortably beat market expectations with interim results but buyers were in short supply, sending the shares 6p worse to 898p and 16p weaker to 1,260p respectively. The FTSE 100 continued its recent run of narrow movement by closing 12.6p lower at 5902.6.

Reactions to LogicaCMG's £882m acquisition of WM-data, a Swedish rival, appear to be mixed at best. The stock fell more than 7 per cent on Monday as the consensus was that Logica had overpaid. The brokers Collins Stewart and Deutsche Bank downgraded the shares, with Collins saying "sell" and targeting 150p, while Merrill Lynch and Citigroup were more positive. If the shares fall to 147p, WM-data can walk away from the deal, but one analyst said that was unlikely as WM-data "is doing cartwheels" over the price. LogicaCMG recovered 0.5p to close at 160p.

The word in the market is that trading has been good over the past couple of months for the information technology recruitment firm Sthree, 13p firmer at 313p, the best performer in the FTSE 250. The group, which gave a bullish trading statement along with good interims at the end of last month, is rumoured to be trading ahead of internal forecasts and investing heavily in new staff and new sectors.

Vague bid talk helped the AIM-listed US finance group Peach Holdings climb 7p to close at 349p. Market makers said demand for the shares was significantly higher than normal, with more than 200,000 changing hands.

With each day that passes the pressure builds on iSoft, the embattled software group. It has until the end of the week to announce results after being given 120 days grace by regulators, but with no sign of the results it looks increasingly likely the shares will be suspended. With traders concerned that its contracts with Accenture and CSC may be under scrutiny, most closed long positions, sending the shares down to 43.75p, a fall of 2.75p and yet another all-time low.

The word in the market is that management at Central African Mining is involved in presentations to institutional investors. Since Credit Suisse initiated coverage of the stock on 24 July, giving a price target of 100p, business in the copper and cobalt producer has been one-way traffic. The shares rebounded 1p to close at 49.5p on good volume of 9.9 million shares.

An encouraging trading update from Character Group, the toy licensing group, saw the shares climb 5.25p to 71.75p. The house broker Charles Stanley upped its recommendation on the shares to "strong buy" with an 85p-a-share target price. In a note to clients, it highlighted the group's low price-to-earnings ratio in relation to its peers, on top of its share buy-back programme and good dividend yield.

There was a good start to life as a publicly quoted company for Zenergy Power, whose shares closed at 99.5p on AIM - an 18.5 per cent premium to the placing price of 84p.