Market Report: AT&T in the frame for Cable & Wireless bid

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The Independent Online

Traders talked about Cable & Wireless yesterday after Collins Stewart highlighted the prospect of a bid from AT&T, the American telecoms giant.

The broker discounted the "perennial" Deutsche Telekom rumour, saying: "We continue to see AT&T as a far more likely buyer.

"AT&T has a stated interest of international expansion in the corporate space and Cable & Wireless could help with that," the broker added. The suggestion failed to lift the stock, weaker by 2p at 167.5p, which traders said was down to C&W's offer for Thus, the small telecoms group, which was down 0.25p at 178p.

Elsewhere, strong bid rumours were evident around International Ferro Metals, the FTSE 250-listed ferrochrome producer, which was up 11.66 per cent, or 8.25p, at 79p. The talk remained vague, bearing no clues about the identity of the suitor, but suggested that a bid proposal may emerge as early as next week.

The FTSE 100 was down 1.6 points at 5,370.2, while the FTSE 250 was up 41.8 points at 8,939.1. Resource stock dominated the London benchmark yet again as commodity prices supplemented Wednesday's gains. As a result, Cairn Energy, the India-focused oil and gas explorer and producer, was up 139p at 2,876p and Anglo American, the mining group, gained 112p to 2,870p.

Eurasian Natural Resources Corporation, up 35p at 1,062p, stood out after posting forecast-beating interim results.

"ENRC has high-quality, low-cost assets," said Cazenove. "Clearly there is potential to put its cash pile to work in extending an already impressive M&A [merger and acquisition] track record."

Xstrata was also up, gaining 152p to 3,160p, following reports that it was seeking a loan of up to $15bn (£8bn) to fund its planned $10bn hostile bid for Lonmin, the platinum producer which advanced to 3,450p, up 11p. According to the reports, Xstrata planned to use the loan to fund the acquisition and to refinance its own and Lonmin's existing debt.

On the downside, Schroders was among the worst performers on the senior index, down 31.5p at 939p, after analysts at Landsbanki highlighted the "challenging environment" faced by the asset manager and reduced their target price for the stock to 1,085p from 1,145p. They kept its "buy" rating, however, noting that "although life is tough for the sector, Schroders has surplus capital," giving it the chance to add value via strategic acquisitions.

"Although seemingly reticent in pursuing opportunities before, it had the platform (in asset management in particular) to look at larger deals now," the broker said, adding: "This remains a potential catalyst for future share price performance. Conversely, demerger talk has ebbed recently."

The banking sector also proved a drag on the London benchmark – leading stocks were hit by renewed fears for Fannie Mae and Freddie Mac, the US mortgage market giants. As a result, Lloyds TSB was down 10.25p at 280p and Royal Bank of Scotland was 4.5p weaker at 209.5p.

Elsewhere, Kingfisher gained 1.6p to 122.1p after the Office for National Statistics said retail sales volumes were up 0.8 per cent last month, well ahead of analyst estimates of a 0.3 per cent decline.

Among the mid-caps, housebuilders shone after in-line results and reassuring comments from Persimmon prompted a round of short covering across the sector. Persimmon posted a 64 per cent fall in interim pre-tax profits and slashed its dividend by two thirds, but said that its current debt was "comfortably within" its committed facilities of £1.4bn.

Traders said the update had sparked hopes of a recovery in sector share prices, which in turn had pushed out short sellers betting on future declines. "There are some large bears in this sector and this has squeezed them pretty hard," said one trader.

According to the latest figures from Data Explorers, 28.75 per cent of Persimmon, which closed up 9.55 per cent, or 28.5p, at 327p, and 22.99 per cent of Barratt Developments, which gained 13.75 per cent, or 15.5p, to 128.25p, is out loan.

Michael Page supplemented earlier gains, rising 3.53 per cent, or 12.75p, to 373.5p, after market rumours suggested that the staffing group had approached large institutional shareholders to gauge the level of interest in a possible 500p-per-share proposal from Adecco. The rumours added that Adecco may table the improved bid before the end of this month.

Imperial Energy also attracted fresh bid talk last night. The stock gained 5.41 per cent, or 62p, to 1,208p, following reports in the Indian press which suggested ONGC Videsh, the international arm of the state-backed Oil and Natural Gas Corporation, had received clearance to offer up to $3.5bn for the company if the bidding war heats up.

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