M&S and Tesco hopes pep up tired Footsie

Market Report

MARKS & SPENCER and Tesco soared yesterday as rumours of a pounds 24bn link-up between two of Britain's premier retailers swept the market.

The excitement surrounding M&S was compounded by strong speculation that the legendary US investor, Warren Buffett, was about to reveal that he has a 3 per cent stake in the giant of Baker Street. The twin rumours left M&S 16.75p higher at 461p, with over 16 million shares traded.

But it was the prospect of a merger with Tesco that captured the market's attention. The UK's biggest supermarket notched up the second-largest rise in the FTSE 100, putting on up 12.25p to 190p on turnover of nearly 40 million shares.

Dealers were said to be piling into the two stocks, lured by the prospect of another stores mega-merger less than a week after the pounds 18bn proposed tie-up between Asda and Kingfisher. The two companies played it down, but supporters of the M&S-Tesco story argued that a merger between the two would be a perfect way to counter the ambitions of their rivals.

A fusion between M&S and Tesco would produce a formidable high-street powerhouse with sales of over pounds 24bn and a retail offering ranging from baked beans to underwear. Cost savings from staff reduction and enhanced buying power could be over pounds 100m.

Given Tesco's current strength and M&S's recent loss of form, it is likely that the supermarket chain would be in the driving seat, with a bigger slice of top management positions and, possibly, more shares in the combined group. The competition authorities could prove the biggest stumbling block, with the two groups' interests in the food market likely to be carefully scrutinised by the regulators.

The rest of the FTSE 100 had a quiet day in the shadow of the two retailers, settling 8.8 points lower at 6,311.0. A positive opening in New York did little to dispel the worries raised by Tuesday's big fall. Stronger-than- expected average earnings figures, a pointer to higher interest rates, also prompted players to sit on the sidelines.

With the market looking tired, brokers' comments had a field day. BAT, the high-yielding cigarette maker, puffed up 39.5p to 512.5p - the biggest rise among blue chips - after HSBC said "buy" and targeted 548p. Imperial Tobacco followed suit, rising 19p to 595.5p.

BG sparked 21.75p higher to 358.75p as Merrill Lynch advised clients to "accumulate". Offshoot Centrica rose 2.25p to 112.5p as it outlined plans to launch a savings and loans business.

Pearson, publisher of the Financial Times, papered over recent cracks with a 66p rise to 1,281p. Morgan Stanley and Credit Lyonnais gave the stock a big push.

The Warren Buffet speculation did not stop with M&S. Unilever, up 13p to 557.5p, was also in the frame. Another Buffet favourite, Diageo, fizzed 8p higher to 696p after the French champagne group LVMH said it would only sell its pounds 1.4bn stake if the stock rises at least 25 per cent.

Some of the companies savaged in Tuesday's collapse exacted their revenge yesterday. Dixons, the retailer-cum-Internet provider, logged on a 68p rise to 1,298p as Schroders advised to buy after Tuesday's dip. Telecom stocks were back in favour, with Energis up 39p to 1,590p, Colt rising 14p to 1,084p and Cable & Wireless ringing a 4p increase to 775.5p.

The techies' rise came at the expense of the cyclical stocks - the stock market's latest passion. Billiton, the mining group, dug up a 11.25p fall to 187.75p as dealers booked in profits after a week-long rally. BOC, the gas group, looked flat, losing 56.5p to 1,025p on worries that the pound's strength will puncture profits.

British Steel also caught the sterling blues and fell 9.75p to 147.25p. British Airways nosedived 27.25p to 501.5p amid fears that rising oil prices will increase the price of aviation fuel.

Bank of Scotland was 40p overdrawn at 870p after reporting dull results and higher-than-expected bad debts. The interest-rate fear shook the housebuilders; Barratt crumbled 15.5p to 358.5p, Persimmon slid 10p to 249p and Redrow fell 6.5p to 239p.

The undercard was enlivened by takeover rumours and a rebound in computer stocks. The FTSE 250 outperformed its bigger brother, ending 9.8 points higher at 5,763.4, while the small cap finished 12.5 points up at 2,485.5.

Powerscreen, the troubled Northern Irish engineer, rose to 150p amid rumours that a bid north of 200p is near. Inn Business, the pub group, flowed 6.5p higher to a 12-month peak of 77.5p after confirming bid talks with the venture capitalist Alchemy Partners.

The cutting tools maker Brooke Industrial powered 12p ahead to 82p after receiving an 82p-per-share bid from rival Howle. The sausage-skin maker Devro sizzled to a 5p rise at 154p amid continuing speculation of a management buyout or a bid from its former chairman.

Merivale Moore, the property minnow, developed a 7.5p rise to 91.5p on talk of an offer from competitor Warner Estates, but Newcastle United was caught offside, losing 5p to 73.5p after the cable group NTL said it would not make a bid. Premier Oil rose 1.5p to 19p despite a bust-up with some rebel shareholders who want to oust the board.

Computer and Internet stocks bounced back in sympathy with their US peers. Nasdaq-inspired buying pushed Logica up 47.5p to 592.5p. ARM Holdings almost matched this; it soared 56.25p to 705p after splitting its shares into four. Computacenter, up 37.5p to 500p, and FI Group, 15p higher at 302.5p, completed the IT resurrection.

The Internet minnow Dialog surged 4.5p to 124p on vague talk that a media group is keen to buy a near-30 per cent stake.

Fine Arts Developments, the birthday cards maker, sent out an 8p rise to 131.5p; the mail-order group N Brown is believed to be interested.

SEAQ VOLUME: 1.27 billion

SEAQ TRADES: 86,208

GILTS INDEX: 111.56 +0.10

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own