Market Report: Carphone rung up as suitors prepare to call

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The Independent Online

A late horror show slapped the market down 2 per cent yesterday, and most chat went with it. Only Carphone Warehouse was talked up as a takeover target with not one but two predators in the frame.

Investors piled in on the reheated speculation of imminent offers from Best Buy in the US and Vodafone, sending it to the top of the leaderboard, up 2.6 per cent at 340.75p.

Best Buy already owns 3 per cent of Carphone and has two joint ventures with its UK counterpart. Steve Clayton of Mirabaud Securities said the tie-up had proved positive "so perhaps Best Buy has decided to internalise the whole thing with a full takeover". He added that a Vodafone offer was unlikely, as other networks would not be happy to see their largest independent distributor fall into a rival's hands. Carphone's stock has also benefited from strong Christmas iPhone sales. It is the only independent distributor of Apple's whizzy new gadget in the UK.

The FTSE 100 looked chipper in the morning, hitting a high of 55 points up, but it all changed after disappointing US non-farm payroll numbers. London spiralled before the Dow even opened and continued down with New York. It ended the day 130.9 points lower at 6,348.5p, with only four stocks in the black.

David Buik of Cantor Index said the dismal employment figures would force the Fed to cut interest rates by 50 basis points at the end of the month.

Despite retreating with the market at the close, Rio Tinto and BHP Billiton had risen in the morning after Bernstein Research predicted BHP would up its offer to between 3.3 and 3.5 BHP shares per Rio share, and possibly add a cash component. BHP ended 55p down, while Rio weakened 155p.

As the casualties piled up, the retailers continued their dramatic swallow dive, with Kingfisher the worst of the day. It belly flopped 6.8 per cent at the close to 130p. Marks & Spencer, which is rep-orting its third-quarter performance on Wednesday, weakened 4.5 per cent to 518p.

Mid-tier retail also took a hammering. Signet Group slumped 5.9 per cent to 60.25p as Credit Suisse cut its price target from 75p to 65p. This followed the company's comments about the deterioration of US sales in the fourth quarter.

DSG International continued down after the previous day's profit warning, despite support from Goldman Sachs. The stock fell 1p to 77p, even though the powerhouse broker upped it to "neutral" from "sell", saying the bad news was priced in.

The pubs and restaurant sector decline gathered pace, with Restaurant Group the worst, 6.1 per cent lower at 176p. Landsbanki believes "news will not be good on drinks sales for any of the operators". Analyst Kate Pettem said there could be a round of estimate downgrades in the sector, possibly sparked by the trading update season.

The property development company Berkeley Group Holdings was the worst performer, down 18.9 per cent at 1,054p. It was down on a technical point as the group redeemed its 2008 "B" shares yesterday. The oil equipment and services companies flew the flag for the industry yesterday, with Petrofac rising 1.9 per cent to 581p. There was little other good news lifting those that had edged into positive terri-tory. Continued hopes for a bid managed to lift broker Close Brothers up 1.6 per cent to 965p.

Top of AIM was Nestor Healthcare. The group rose 41.2 per cent to 48p after it revealed it had been approached over a potential takeover.

Another group that received a shot in the arm from investors was Sarantel Group, which makes antennae for mobile and wireless devices. Investors filled their boots on news of a significant contract win, sending the stock up 40 per cent to 8.75p. It has been chosen by Garmin to use its antennae in its handheld GPS receivers.

One stock whose star has been on the wane since touching the heights of 450p four years ago is Gresham Computing. The financial technology group has been further on the slide over the past year, but rose 27.7 per cent yesterday to 71.5p. This followed a trading update which expected a "significantly improved second half to 2007".

Another small-cap tech stock did not fare so well with a trading statement of its own. OCZ Technology Group short-circuited 26.1 per cent to 34p as it warned on full-year profits. It said the results would be lower than expected because of weaker-than-expected sales in November and December in the UK and Russian markets.

The worst small cap of the day was Land of Leather, after it also warned on profits. The group's value almost halved to 59p on the news that profits would be significantly below last year. This followed poor trading in the past few months, in a sector that is not expected to rally in the near future.