Market Report: A&L banks a rise on rumours of Santander talks

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The Independent Online

So the year ended with a whimper, not a bang. As the last trading day of the year closed, there was little corporate news, although speculation did touch a few in the FTSE 100.

Flirting with top spot in early trading was Alliance & Leicester. The rise followed overnight reports that Banco Santander, which owns Abbey, had held talks with another unnamed UK mortgage lender.

The rumours had been around earlier in the year, with A&L punted as the most likely candidate. Clearly the market put two and two together, and the result added 2 per cent to A&L's value; although it retreated slightly to close up 1.25 per cent at 648p.

As with much of the recent trading in this holiday period, activity was light as most traders were busying their preparations to see in the new year. The final session of 2007 only a half day saw the FTSE 100 shed 20 points at 6,456.9. Over the year, it has managed a rise of 3.8 per cent from its opening of 6,220.8 on 1 January.

One stock that remained positive from the previous week was British Energy Group, which had received backing from Goldman Sachs on Friday. The group's shares have suffered recently as two of its reactors went off line, but the US broker retained its "conviction buy" stance on the back of rising oil prices and its belief that the company has been oversold. It rose 2.52 per cent to 549p.

The retailers began to creep back up yesterday, on talk that maybe the Christmas period wasn't quite as bad as expected. The sector's best top-tier performer was Next in anticipation of its trading update early this month. The clothing store strengthened 1.18 per cent to 1,624p.

The life insurer Friends Provident ended the session top of the leader board. The spectre of consolidation has hung heavy over the sector since the summer, and Friends was once more in the spotlight yesterday. Reports doing the rounds this weekend said the group could be hanging a "For Sale" sign out front soon. The news sent the stock up 2.77 per cent to 163.4p. Friends, as well as Standard Life, lost out in the takeover battle for Resolution to Hugh Osmond's Pearl Group, which had a 720p-per-share offer recommended in November.

The news dragged a few of its peers along with it, including Prudential, which rose 1.5p to 712p. Yet investors turned against Old Mutual, which ended the day as the worst blue-chip performer, down 2.56 per cent at 167.6p.

It was a bits-and-pieces day for the FTSE 100, and news flow from the previous week continued to exert influence. Taylor Wimpey finished a further 2.05 per cent lower at 203.25p, following a report from Nationwide. The building society said house prices had fallen in December for the second consecutive month.

It has been a great year for the miners following soaring commodity prices and ongoing takeover speculation. But it was a different tune on the last day of the year as the two candidates for 2007's potential "mega merger" fell slightly. Rio Tinto weakened 0.99 per cent to 5,317p, while BHP Billiton gave up 0.96 per cent to 1,546p. This came on speculation that BHP would refuse to up its bid as the February deadline, set by the UK Takeover Panel, edges closer.

The top riser on the mid tier was Game Group, which actually had some news driving it yesterday. The computer games company stormed up 7.76 per cent to 250p after it revealed in a trading statement that its full-year results would beat expectations. It said full-year profit before tax would not be less than 70m, compared with 29.5m last year.

Also up was new FTSE 250 entrant International Ferro Metals, which continued to rebound following problems with its furnaces earlier this year. It closed up 5.49 per cent at 120p.

Poor old New Star Asset Management. The group has had a terrible run since May, when it peaked at 518p. Since then, the credit crunch and fears over its UK property fund have seen it spiral ever lower. It finished the session at the bottom of the second string, another 5.82 per cent lower at 178p.

It was a pretty quiet day among the small caps. One trader said: "There is nothing going on; there are a few seasonal spikes, but little more than that. I've got my runners on, the laces tied up and I'm out of here the minute the market closes."

London Scottish Bank was among the worst fallers in the wider market, after it chose New Year's Eve to reveal it had suffered an impairment charge of 22m. The bank added it would undershoot its regulatory capital requirements by about 13m. The news sent its shares spiralling 18.18 per cent to 63p.

Punters threw a few quid on Alphameric after it emerged it was in negotiations with major bookmakers to license them its Turf TV channel, following its recent deal with Coral. It added that no contracts had as yet been signed, but the shares still soared 12.73 per cent to 31p.

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