Market Report: Aggreko powers ahead as bid talk resurfaces

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The Independent Online

The city plugged into Aggreko yesterday to give its shares a powerful jolt.

The global temporary power supplier first became the subject of electrifying takeover talk a couple of months ago but yesterday the voltage was cranked up after a link to a potential bid from the Swiss engineering group ABB.

Shares in Aggreko powered ahead by 79p, or 5.5 per cent, to 1,515p, making it comfortably the biggest riser on the FTSE 100. However, market sources pointed to hedge funds driving the talk ahead of them taking profits on Aggreko, which has enjoyed a strong rebound from a 12-month low of 639.5p last year.

While an electrifying set of interim results by Aggreko last month further fuelled the rumour mill, the company is thought not to have received an approach in any shape or form. And yesterday's leap left some market sources scratching their head.

Overall, the FTSE 100 was lifted by better-than-expected US jobs data. US non-payroll data fell by a relatively small 54,000 in August, which was streets ahead of the more than 100,000 that economists had forecast.

While the jobs fillip from across the pond cheered investors, it was overall a day of thin trading volumes. That said, it was a roller-coaster day for Yell, the directories publisher. In early trading, shares in Yell rocketed by 6 per cent to hit 19.6p, partly due to speculators covering their short positions in the company after flaky takeover talk led to a jump in the previous session.

But by the close of play yesterday, it was back to reality for Yell, whose shares fell by 1p, or 5.9 per cent, to 16.8p. Furthermore, aside from brave bargain-hunters, such bid talk left traders unconvinced, as Yell has a debt mountain of about £3bn and its shares have tanked over the past year.

For a different reason, the shares of another UK-based company again felt the warm glow of talk around a potential takeover. For the second day running, bid speculation swirled around Autonomy – the UK-based software company that has grown into a global player after it was founded in 1996 by Mike Lynch, its current chief executive. The firm was lifted by a link to a potential bid from the world's two biggest software companies, Microsoft and Oracle. Yesterday, shares in Autonomy leapt by 59p, or 3.4 per cent, to 1775p.

Meanwhile, Cable & Wireless, the telecoms specialist, continued to experience the yo-yo effect from unsubstantiated speculation over a potential bid from the likes of AT&T or Verizon. Following a surge on Wednesday after press reports, Cable & Wireless fell back the following day. But the telecoms specialist was back in vogue and its shares surged by 3.2p, or 4.5 per cent, to 73p.

Arguably more substantial investment reasons saw BAE Systems, the aerospace company, flying high for the second consecutive day. The UK-based company has until recently suffered a heavy sell-off in its shares, partly over fears of a sharp cut in government spending to be unveiled in its strategic defence review in October.

But market sources stated that such concerns had been overblown, given that BAE only generates about a fifth of its group sales from the UK. In addition, a lingering boost from a bullish research note by Investec on Thursday, which slapped a share price target of 340p on the company, helped to power its shares up 8.3p to 321.6p.

Elsewhere, shares in Barclays gained an impressive 13p to 325p. This came on the day that Chris Lucas, Barclays' group finance director, spoke at the Nomura conference in London. People familiar with the matter said he confirmed guidance that bad debt charge expectations would be down by between 15 per cent and 20 per cent for the year ahead.

David Buik, at BGC Partners, said that Barclays is the "cheapest" of the UK banks and it offers "good value". He said that some traders tried to short Barclays' shares around £3, but they were "quickly seen off with aplomb". Buyers piled into Barclays yesterday ahead of Monday's Labor Day bank holiday in the US, hoping that the market will open positively on Tuesday.

But it was another day to forget for Tullow Oil. Shares in the oil and gas producer have waned over recent days, following its interim results last week. Yesterday, Tullow Oil fell back by 29p, or 2.5 per cent, to 1,156p – making it the biggest faller in the FTSE 100. No other member of the blue-chip index fell by more than 1 per cent on Friday.

Down by a less eye-catching figure was Morrisons, the Bradford-based grocer, ahead of its half-year results on Thursday. Its shares slipped by 1.7p to 289.3p, although the City seems to now be adopting a "wait and see" approach before the retailer's new chief executive, Dalton Philips, unveils his first thoughts on his strategic vision for the UK's fourth biggest grocer. Analysts at UBS have pencilled in a 9.1 per cent rise in first-half profits to £396m. While industry data suggests that Morrisons has continued to deliver sales growth marginally ahead of its rivals, UBS expects a similar rise in underlying sales in the second quarter to the 0.9 per cent figure in the previous three months.

The City will scrutinise any comments by Mr Philips about it venturing into online grocery or convenience stores, but market sources believe he will not spring any surprises.

FTSE 100 Risers

BP 401.7p (up 9.1p, or 2.3 per cent)

Speculation that Gazprom may buy some of BP's assets in Azerbaijan.

British Land 477.2p (up 10.2p, 2.2 per cent)

Property giants joined by rivals in rise as investor sentiment towards sector returns.

Icap 438.6p (up 9.7p, 2.3 per cent)

Investors continue to identify opportunity after earlier news it will exploit new derivative regulations.

FTSE 250 Risers

Game Group 72.6p (3.2p, or 4.2 per cent)

Buoyed by postive notes put out by rival DSGi and brighter outlook for games market with new Xbox.

Go-Ahead 1178p (up 13p, 1.1 per cent)

Investors continue to back transport group after its results beat expectations on Thursday.

Computacenter 4824p (up 10p, 3.6 per cent)

UK technology companies in vogue with speculation they may become takeover targets.

FTSE 100 Fallers

Sainsbury's 368.6p (down 1.7p, 0.5 per cent)

Weak day for shares in the UK's biggest grocers, as concerns over outlook for sector remain.

Whibread 1507p (down 8p, 0.5 per cent)

Profit taking ahead of its second-quarter trading update on Tuesday.

Associated British Food 1065p (down 7p, 0.7 per cent)

Sentiment slips on conglomerate stretching from Primark fashion chain to Twinings tea.

FTSE 250 Fallers

Domino's Pizza 439.5p (down 10.8p, 2.4 per cent)

Profit taking after healthy rise in shares over the past 12 months.

Dunelm 386.3p (down10.2p, 2.6 per cent)

Rival John Lewis continues to grab market share from retailers across the homewares and furnishings sector.

Greggs 42.4p (down 4.2p, 0.9 per cent)

Caution over baker as it faces tough consumer environment and rising input costs.