Takeover gossip really is back with a bang. Yesterday's talk had a bidder lining up for a tilt at the world's largest listed hedge fund, Man Group. Details of the suitor and price were sketchy, but the stock was certainly in demand as it soared by8.9 per cent.
Man was already well off the year's trough of 174p in March, but shares had drifted lower since mid-August.
The sector has been far from a stock-market darling. Investors have taken $150bn out of global funds since the onset of the crunch, while the Hedge Fund Implode-O-Meter, which charts the woes of the industry, said 117 major funds have collapsed at 71 outfits since 2006. The latest were some run by Atticus this month.
Traders pushed the fears to one side and manned up, on the deal speculation and bullish statements from senior managers on its future.
Les Ames, dealing director at WH Ireland, said: "Everyone is now looking for the next bit of M&A. It's great that deals are now back in conversation." There were more vague rumours of interest in Smith & Nephew, although the shares fell 1p to 558.5p.
The miners looked solid as strong industrial output data from China continued to support the shares. The news lifted hopes that metals would be much in demand in the coming months. Lonmin has been in focus in the latest round of M&A gossip. While it sank in the morning as rumours of a bid by Xstrata were scotched by Bank of America-Merrill Lynch, good news in the wider market saw it rebound 3.24 per cent to 1722p.
There was some actual M&A activity in the sector as an Indian arm of Vedanta Resources upped its offer for the bankrupt US group Asarco to $2.5bn. It increased the bid in an attempt to see off a rival offer from Grupo Mexico. Shares in Vedanta's Sterlite Industries fell in India, but the parent remained unaffected, and rose with the sector by 2.2 per cent to 1932p.
Fresnillo enjoyed a good rise yesterday, the session before it makes its way into the list of Europe's top shares. The group is set for promotion to the FTSE Eurofirst 300, with Wolseley the only other London-listed stock to make it up this round. It closed 5 per cent up at 735.5p.
News from the Emerald Isle had Lloyds Banking Group investors' eyes-a-shining yesterday. Lloyds' Bank of Scotland (Ireland) business wants to merge with a rival to create a "third force" in Irish banking, according to local reports. It was helped up by a "buy" rating from SG Securities, who also slapped on a 160p target price. It didn't hold at the close, though, ending down 0.15 per cent at 105p.
The insurers were buoyed, helped by the man from the Pru – Tidjane Thiam, who is soon to be confirmed as chief executive – talking up a move out to Asia. Prudential closed up 2p at 562p, as it was also linked with a bid for the life assurance business of Singapore's United Overseas Bank.
As optimism grew over recovery in the third quarter, along with the strength of the miners, the FTSE 100 rose through that psychological 5,000-point barrier, and stayed there. It closed up 0.48 per cent at 5011.4 points.
Market experts were scratching their heads over further pain at Home Retail Group, the owner of Argos and Homebase. The retail stock was bottom of the pile for the second day in a row, despite five brokers, including Deutsche Bank, Credit Suisse and UBS, throwing their weight behind it. "The group has enjoyed some pretty heavy support in recent months, but investors must have decided to pocket their gains," one said. It closed down 4.72 per cent at 293p.
Defensives were lower as the market rose, with GlaxoSmithKline down 0.17 per at 1182p, while many of the other classic defensive sectors crept into positive territory by the close.
Top of the second string was the environmental consultancy RPS Group. The stock stormed up 14.39 per cent to 240p after support from the blue-blooded broker Cazenove, which upped its target from "in line" to "outperform".
SThree, the recruitment firm, managed to pull itself out of negative territory in the morning after it posted a 34 per cent slump in profits for the third quarter. The analysts withdrew support, yet the stock closed up after a rallying cry from the chief executive, Russell Clements. He said the group expected an upturn and was set to hire new staff in anticipation, sending the shares up 2.37 per cent to 276.9p.
Also up was the hotel group Millennium & Copthorne, after Credit Suisse raised its target to "outperform". It closed up 2 per cent at 399p.
One trader said that the market believed a boost in house prices was in the pipeline, and the builders felt the subsequent lift. Persimmon rose 1 per cent to 514p. The sector stock that bucked that trend was Redrow, a day after posting a full-year loss of £44.2m sent it down 5 per cent. Yesterday it was down a further 2.25 per cent to 22p as Credit Suisse slashed its target price from 309p to 267p.
In the wider market, 888 Holdings hit the jackpot as it sealed a partnership agreement with the US casino operator Hurrah. Investors were backing the deal as positive especially if the US market opens up later this year. Shares closed up 14.3 per cent at 97.5p.Reuse content