Market Report: Broker takeover talk provides spark of interest

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The Independent Online

Those expecting a brave new dawn on the first trading day of 2008 were disappointed, as investors were dogged by the same old fears and market volumes remained relatively light.

There were few stories to excite the rumour mongers, but the brokers were back in focus as takeover chat from the past couple of months was resurrected. One trader said talk had emerged that one of the smaller groups would be taken out, with the names in the frame including Evolution Group and Panmure Gordon. One trader said: "There is an expectation in some quarters that a broker will announce it's holding discussions in the near future."

Evolution was mooted as a target for Icap last month, with the interdealer broker rumoured to be putting together a war chest for an acquisition in the sector. Evolution rose 0.25p to 123.25p, while Panmure remained flat at 91.5p.

Another broker in the takeover spotlight, Collins Stewart, fell on vague rum-ours of internal tensions over the direction of the business. It closed down 5.75p at 167.25p.

The soaraway leader at the top of the FTSE 100 was Alliance & Leicester, on hopes it could become a target. A&L was revealed to be the mystery group that held talks with Banco Santander last month. The stock stormed up 16.4 per cent to 754p on reports that the Spanish bank had not given up on a deal.

The news gave the whole sector some welcome relief, with Barclays up solidly bef-ore retreating with the market to close up 0.5p at 504.5p. On the second tier, Bradford & Bingley also rallied, ending the day 4.0 per cent stronger at 278.75p.

Next was also looking sharp in anticipation of its Christmas trading update today. Fears of a weak festive period smashed the retailers in December but some now believe the sell-off might have been overdone. Next rose 2.6 per cent to 1,666p. It was helped by a Goldman Sachs note, which, despite being a retail bear for 2008, has a "buy" recommendation on the stock.

The FTSE 100 rose 55.4 points in the morning but the gains were reversed after disappointing manufacturing data in the US. It slid all afternoon, ending 40.2 points lower at 6,416.7. One trader said: "The weakness in the US has been put down to housing and consumption. It will be a bad if it is in manufacturing as well."

At the bottom of those spiralling downwards were a few of the new entrants to the blue-chip index. TUI Travel, which had started its life in the FTSE 100 particularly strongly, sunk to the foot of the table, down 4.2 per cent to 281.5p. Another faller was the high-flying exploration and production group Cairn Energy, which shed 4 per cent to 2,951p.

The mining sector dominated 2007, and towards the end of the year Xstrata strengthened on frenzied speculation that it was the focus of competing bids. It hit the headlines for different reasons yesterday, as news emerged that communist rebels in the Philippines had raided its Tampakan mine. The attack on the gold and copper project sent its shares down 2.4 per cent to 3,465p. After hitting record highs on New Year's Eve, Game Group fell victim to the profit-takers. The mid-cap computer game store retreated 3.7 per cent yesterday to 240.0p. Imperial Energy ended the day as the worst midcap, down 5.9 per cent to 1,459p.

One solid riser on the second string was Informa, which rose 3.4 per cent to 477p. The publishing group received support from Panmure Gordon, which upgraded its recommendation to "buy". The broker said too much bad news had been priced into the stock, which now trades at the bottom end of the range.

It has been a shocking six months for New Star Asset Management. As the sector reeled in the wake of the credit crunch, it was hit by news of falls in its UK property unit trust. It started the new year with some positive sentiment, rising to near the summit, and ended up 6.2 per cent to 189p.

Pantheon Resources proved a strong AIM perfor-mer. The oil and gas group, which is active in the Gulf of Mexico, rose 16.5 per cent to 53p after it announced the appointment of a new chief executive. John "Jay" Cheatham took over on New Year's Day.

Another sector riser was Max Petroleum, which has resumed production in its Zhana Makat field in Kazak-hstan. The group rose 8.2 per cent to 66p after the country's Ministry of Energy and Mineral Resources gave their approval.

Brinkley Mining rose 18.3 per cent to 6.15p after director share-buying. One trader said: "This stock took a hammering last year; it is desperate to convince the market it is worth buying."

NetDimensions staged a late collapse after it released a trading statement 45 minutes before the market closed. The software group's shares were down 32 per cent to 33.5p after it revealed results would be below current market expectations.

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