Market Report: Aviva lifted by renewed talk of Italian interest

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The Independent Online

The insurance giant Aviva was one of the few blue-chip stocks to buck a weaker market yesterday as talk did the rounds, for what seems like the umpteenth time this year, that its Italian rival Generali is poised to launch a bid for the owner of Norwich Union.

So far, the only winners in a year of constant consolidation speculation in the insurance sector are probably investment banks. Aviva has made its own intentions clear with a failed bid for Prudential that was knocked back in March, and traders said any approach from Generali would have to be very attractively priced to get any consideration from the Aviva board. Aviva shares ticked 2.5p higher to 742.5p, while Prudential, which many traders believe is still a target for Aviva, shed 4.5p to 588.5p.

The FTSE 100 reshuffle takes place based on yesterday's closing prices, and the fund management group Schroders, 32p weaker at 921p, will drop out for the first time in 10 years. With BOC already replaced by Bradford & Bingley, Rentokil Initial, down 1.75p to 151.25p, will follow Schroders down to the FTSE 250. Standard Life, despite dropping a penny to 267.5p, will take Schroders' place at the top table, while the life insurance group Resolution, off 7p at 589p, also wins promotion.

Profit-taking in the mining sector, fears over the interest rate decision due today and an uninspiring start to the shortened trading week on Wall Street pushed the FTSE 100 52.4 lower to 5,929.3.

Far from being a bid target, Citigroup believes Barclays shares are an outright "sell", sending the stock 8p worse to 665p. The US broker cut its target price for the shares to 575p, claiming that under new European regulations the group may not be able to increase the amount of capital it commits to its investment banking arm, a key driver for group growth. Other banking stocks followed Barclays lower, HSBC losing 7p to 955p and Lloyds TSB shedding 3p to 529.5p.

PartyGaming, the online gambling group, reports interim results today and most brokers expect another set of bumper numbers. But the group has been unable to shake off the fallout from the arrest of the BetonSports chief executive David Carruthers and the company seems to be no closer to its first acquisition. The shares nudged 0.75p better to 117.25p, with its rival 888 Holdings rallying strongly late in the session to close 15.25p firmer at 171p.

Halfords, the car accessory retailer, jumped on the back of bid speculation early in the session, peaking at 341p, a rise of 14p. Traders said CVC Capital Partners, the private equity group, is poised to launch an offer for the group that could value the shares at up to 360p. CVC already owns 7.4 per cent of the shares. But the excitement died quickly and the stock closed 1.5p lower at 325.5p.

The delayed launch in Europe of Sony's Playstation 3, which will not be available until March, hit Game Group hard with a 6.5p loss to 84.5p. Seymour Pierce reiterated its "sell" stance on the shares, and with little prospect of any hardware sales increases until next year, most traders see the shares tracking lower in the short term.

Northern Foods has given its shareholders little to cheer in the past 12 months, issuing a stream of profits warnings amid dire trading conditions. Help could be at hand though - the word is that the private equity house The Blackstone Group is considering making an offer for the company. One trader said: "There is little doubt that bid hopes are keeping the price up. However, given the company's recent history and share price performance, a huge premium is not on the cards." The shares climbed 3.75p to 85p.

Commoditrade, the commodity broking group, added 1.5p to 23.5p - the first time the shares have broken through 22p. One metal trader said: "Commoditrade is probably doing about 70 per cent of the business that goes through the London Metal Exchange and it would not surprise me if the company is growing far faster than investors realise." Corvus Capital, owner of 20.9 per cent of Commoditrade, was a penny firmer at 15p.

Hightex Group enjoyed a strong first day on AIM after it completed a reverse takeover of West 175 Media, closing at 12p, a rise of 2p.

Another newcomer to AIM, GMO, had a stellar start to life as a listed company. The Chinese mobile phone content provider raised £5m through a placing by Corporate Synergy. The shares were placed at 50p with institutions, and more than doubled to peak at 104p in early trade before closing at 96p, a 92 per cent premium.