Market Report: ARM raised by talk of new Microsoft system

As hopes were raised that Microsoft is on the verge of revealing a new version of Windows that can use its technology, ARM Holdings enjoyed a surge in its share price yesterday and came close to taking pole position in the race to become the top riser on the blue-chip index during 2010.

The Cambridge-based chip-maker saw its stock climb by 36.8p to 440.3p following reports that Microsoft will use next month's Consumer Electronics Show to display a new operating system, designed for tablets, that can run on processors made by ARM.

"Everybody seems to be choosing them," said Andrew Gibson, the head of research at Galvan. "It was Apple, then Google and now Microsoft – they have got the big three."

The news was also welcomed by Nick James at Numis, who called it "a further indication of ARM encroaching on Intel's core market". Investors certainly seemed excited, with one trader saying the general sentiment was that "it could be quite a game-changer".

As well as Apple's iPad, ARM's chips can be found in a large number of smartphones. Thanks to the strength of that market recently and persistent speculation about it being a potential takeover target, ARM's share price has put on about 260p since the start of the year, leaving it just behind Weir as the biggest gainer on the top tier in 2010.

Overall the FTSE 100 continued its move upwards yesterday, setting another high for the year. It was lifted by 31.69 points to 5,983.49 despite disappointing gross domestic product figures from both the UK and the US.

The banks played their role in pushing the index forward, off the back of hopes that China will give a helping hand to the eurozone. The country could buy up to €500bn of Portugal's sovereign debt, according to reports from the Continent.

Royal Bank of Scotland saw the biggest surge in the banking sector, gaining 0.51p to 40.69p, while Lloyds Banking Group added 0.46p to 68.95p.

With Vince Cable's well-publicised comments resulting in the Culture Secretary, Jeremy Hunt, now being the minister to decide whether to approve News Corp's attempted acquisition of BSkyB, the satellite broadcaster's shares rose by 14.5p to 743p.

Investec's Steve Liechti said it meant that "the proposed takeover is now a lot more likely", and the latest developments – including the deal getting the green light from the European Commission – led him to give BSkyB a "buy" recommendation.

Elsewhere, voices on the trading floor noted that the cold weather was continuing to boost the utility companies as the nation struggled to keep warm. Scottish & Southern Energy was near the top of the leaderboard by the close of play last nigght bell, booking gains of 30p to close on 1,233p, while National Grid finished 9.5p stronger on 573.5p.

The transport companies on the FTSE 250 were in focus after Morgan Stanley took a look at the sector. The broker's analysts predicted a "modest outlook for bus and rail in 2011", saying that the outlook for volume growth "is poor". They chose Stagecoach and National Express as their preferred picks, and the two put on 5.5p to 215.3p and 1.6p to 245p respectively. The analysts were least keen on Go-Ahead, which lost 31p to end on 1,305p.

SuperGroup dropped for a seventh day in a row, meaning the clothing company has now fallen nearly 25 per cent since it released its first-half figures last week. Before then it had more than tripled its share price after floating in March at 540p, with yesterday's decline of 29p to 1,232p still leaving it well above that level.

Credit Suisse brought some cheer to Carillion after upgrading its advice on the building company to "neutral". The group released a pre-close trading statement last week in which it forecasted that its pretax profit would see strong growth.

The broker said the update has resulted in it raising its earnings per share estimates, adding that this reflects "a strong recovery in the Middle East and robust performance in support services."

There was a fair amount of bid talk going on among the small-cap companies, with Northern Foods one of those attracting suitors. The owner of the Goodfella's brand of pizzas is set to merge with Greencore, yet Boparan Holdings said that it is mulling over making a play for the group, which jumped up 2.5p to 63p as a result.

The outsourcer Mouchel advanced 23.5p to 96.5p after it revealed that it has turned down an approach from Costain. The construction company – which made an offer worth £119m, or about 105.8p-a-share – dipped 1p to 205p following news of the rejection.

Speculation that Travelzest could be the subject of an approach may have excited market gossips, but it failed to move the travel company from 18.25p on the Alternative Investment Market.

The vague chatter was that Gartmore's 30 per cent share of the group may be up for sale for somewhere between 35p and 45p a pop, with TUI Travel one of the names mentioned as being potentially interested.