Market Report: Aero Inventory surges on bid talk from Boeing

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The Independent Online

Traders were sounding downbeat yesterday, whether it was from attacks of hay fever or simply spiralling confidence in the markets, which contributed to a subdued Monday in London. Bid chat was at a premium, with the most interest taking off on the growth market in a company called Aero Inventory.

One trader said in the morning there was "the smell of something going on" and following a surge in the share price, the aircraft parts supplier admitted it had been approached from an unnamed third party.

The aerospace giant Boeing was the name on trader's lips last night at market close, with more than one hearing that the offer would come in £9 a share level. This drove the stock up more than a quarter to close at 626p.

Bid chat from the weekend rags helped lift Anglo American into the top two risers on the FTSE 100. Rumours that it was a target for Vale, the Brazilian mining group, lifted Anglo's shares 4.64 per cent to 3,337p. Anglo and Vale have been at the same negotiation table in the past year, although both were laying down rival proposals for UK-listed miner Xstrata, which fizzled out.

It was also a miner that raged to the top of the leaderboard yesterday. Kazakh group Eurasian Natural Resources Corporation carried on its strong run from last week, closing up 5.83 per cent to 1,398p after it was backed by broker ABN Amro as a "buy". The group rose last week after Kazakhmys lifted its stake in ENRC to 22 per cent. The move came less than a month after ENRC had a bid for Kazakhmys turned down as "derisory" but the talk of the creation of a national champion won't go away.

The big UK announcement was from Barclays. The bank revealed it was to avoid the dreaded rights issue in favour of issuing shares to an external investor – probably a sovereign wealth fund – to bolster the balance sheet. Like a helium balloon it soared early on, at one stage rising past 13 per cent, only to slowly deflate. It closed up 3.46 per cent at 329p. One trader said: "It rose because people were glad of some news, and it wasn't disastrous. But there are still underlying concerns."

The FTSE 100 was buoyed by Barclays in the morning, as well as strong trading overnight in Asia. It retreated throughout the day as sentiment worsened, from reports the CBI had slashed growth forecasts, to rising oil prices and weak US trading. It closed 8 points down at 5,794.6 per cent. One market maker said: "It feels like July and August will be ghastly. It's pretty quiet and there's no good news to offset the decline."

Airline stocks were firmly grounded, with British Airways looking low on gas. The UK national airline was the worst blue chip performer after Goldman Sachs put out a bearish note on the sector saying the implications of higher oil prices were "chilling". BA ended down 4.49 per cent to 239,25p.

Elsewhere, a bearish UBS note hit Unilever, which retreated 2.92 per cent to 1,527p. The Swiss broker cut its recommendation to "sell" in a review of the European sector, saying Unilever "deserves to trade at a discount to the others".

There was a ray of sunshine for one of the credit crunch's biggest casualties: the housebuilders. They were up after a particularly disastrous week, following rumours that institutional investors were preparing to inject fresh capital. Persimmon was up 2.37 per cent to 421.25p, while on the mid-tier Barratt Developments was top of the pile, rising 12.72 per cent to 97.5p. Taylor Wimpey was second, up 8.5 per cent to 76.5p.

Financial technology group Misys was buzzing as broker Seymour Pierce said it anticipated stronger-than-expected earnings in its trading update released on Wednesday. Derek Brown said the group had "weathered the storm in financial services markets better than expected", and added its turnaround plan was ahead of schedule. The shares closed up 3 per cent at 158.25p.

At the other end was Bluebay Asset Management, which shocked investors with a profit warning yesterday. The trading update sliced more than 14 per cent from the fixed-income focused manager's share price, as it closed down 283p. Another set of disappointed investors were those in Soco International. Shares fell 7.05 per cent to 1,860p after it announced an inconclusive drilling attempt in Vietnam.

Down among the small caps, Skypharma was floating high, up 31.82 per cent to 7.25p after FDA approval for its drug that treats Parkinsons, which should provide a handy boost to revenues in the next few years.

Nose diving to the bottom of AIM was hedge fund Absolute Capital Management. It plunged 80 per cent to 8.75p as it appointed its third chief executive this year and spun off its highly rated Argo business.

Another faller was Maple Energy, which gave up 10.23 per cent to 215p, as investor confidence waned on news that the group's chairman and chief executive had sold shares.

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