Market Report: Banks rally on downgrade decision

Investors hungry for a takeover can be an impatient bunch.

Soco International has long been a favourite of the market gossips, but today the mid-tier oil explorer slipped 1.9p to 343.2p as hopes of an imminent approach were dashed.

Whispers that Soco could be about to attract a suitor have intensified recently thanks to the start of production at its major Te Giac Den (TGT) field in Vietnam. However, the City scribblers at Royal Bank of Scotland poured a bucket of cold water over the talk, warning such optimism is premature.

Despite conceding that it was one of the energy explorers most likely to get snapped up in the long term, the analysts said that any aggressor would be likely to need "six to 12 months of production history" from TGT before making a move.

Refusing to give Soco a buy rating, they added that it was "too early to discount an error-free ramp-up" from the field, although they did raise the company's target price to 338p from 320p.

The FTSE 100 index climbed 20.38 points to 5194.63, helped by European Union head José Manuel Barroso announcing that options for euro-zone bonds would soon be presented, but the mood was cautious in the City.

"All the chatter is about 'Merkozy'," said one trader, referring to Angela Merkel andNicolas Sarkozy's eagerly awaited conference call today with Greek prime minister George Papandreou.

It had been expected for a while, but although Moody's finally decided to downgrade the ratings of two of the UK banks' French peers - Société Générale and Crédit Agricole - they still managed to move ahead. Lloyds rose 0.77p to 32.59p while Barclays and RBS ticked up 2.9p to 151.33p and 0.7p to 22.56p respectively, with some saying the ratings agency's move was not as drastic as previously feared.

Reheated whispers yesterday that X Factor boss Simon Cowell could team up with one of the major US networks and make an approach for ITV continued to prompt the broadcaster forwards, as it shifted up a further 1.05p to 54.6p,

Elsewhere, Prudential put on 4.5p to 581p on the back of the re-emergence yesterday of bid rumours, while speculation of private-equity interest in Inmarsat intensified once again, helping it advance 18.8p to 504.75p.

BP was buoyed by claims the US Federal report into the Gulf of Mexico tragedy could be about to be released, with talk suggesting the findings could be relatively positive. "People have been fearing the worst," noted one City voice, as the energy giant was pushed up 14.85p to 396.5p.

Next was sitting pretty on top of the benchmark index after the fashion retailer, which climbed 142p to 2476.5p, revealed an 8.5% rise in its first-half profits. The results were helping others on the beleaguered High Street, with Marks & Spencer advancing 7.9p to 326.55p while Debenhams - which updates the market next week - shot up 3.75p to 56.3p.

Thomas Cook was sunning itself near the top of the FTSE 250, rising 2.31p to 36.09p after French holiday resort group Club Med said its sales for the winter period had got off to a strong start.

Peppa Pig could soon have a new home, after Entertainment One, which owns the rights to the cartoon porcine, revealed it had received a number of bid approaches. The media distributor said that as a result it was considering a range of options, including a sale, which prompted it to rocket up 16.26%, or 26.5p, to 189.5p.