British Gas-owner Centrica was in focus last night as speculators piled in on rumours regarding the possibility of a bid from Gazprom, the Russian energy giant.
The Russians were said to be mulling an offer of as much as 400p per share, a significant premium to last night's closing price of 256.7p, up 4.5p, with some suggesting that a proposal may be forthcoming before the end of the year. Traders, although careful not to discount the possibility of an approach, were generally unconvinced. Similar rumours in the past have amounted to nothing, they said.
In the wider utilities space, Morgan Stanley issued a new circular, scaling back its target prices on a number of companies on account of its expectation of a tough outlook for the water sector. "We differentiate the two stocks we see as having greater regulatory risk – United Utilities and Severn Trent – from those that do not – Pennon and Northumbrian Water – by setting our price target for United and Severn midway between our base and bear cases," the broker said, setting a 420p target on United, which closed 1.7p higher at 477p, and a 905p target on Severn, which was flat at 1005p. The target for price for Pennon, up 6.2p at 480.2p, was moved to 460p, while that for Northumbrian, up 1.5p at 243p, was reduced to 225p.
Overall, the FTSE 100 was broadly unchanged, edging lower by 3.8 points to 5342.13. The mid-cap FTSE 250 fared better, rising by 29.9 points to 9431.05. Given the paucity of significant economic data, traders said it was natural for the market to remain range-bound for the time being. Much depends on the US weekly jobless figures, which are due later today, they said, adding that any signs of a recovery could help to push the FTSE 100 through the 5400-point barrier.
The mining sector led the way on the benchmark index, with leading stocks tracking further gains in the price of leading commodities. Fresnillo, the Mexican silver miner, stood out, climbing to 920p, up almost 5 per cent or 43p, while Lonmin, the platinum producer, swung to 1744p, up 3.6 per cent or 61p. Xstrata gained 4.8 per cent or 52p to 1127p, and Rio Tinto was 77.5p heavier at 3310p at the end of the day. Vedanta Resources was also strong, rising by 62p to 2452p after UBS reiterated its "buy" recommendation, with a revised 2750p target price, compared to 2250p previously.
Elsewhere, Cobham, the defence group, rose to 236.2p, up 6.2p, following some words of support from Morgan Stanley, whose analysts began covering the stock with an "overweight" stance. The broker said the company was its "new top pick in the sector", as its exposure to hi-tech communications, surveillance, cyber warfare and intelligence segments fits well with the changing priorities of the US Department of Defense. "Our view is reinforced by Morgan Stanley strategists, who rate Cobham as the sixth best stock in their European reliable growth screen," the broker added, setting a 300p target price on the stock.
On the downside, the supermarket group Morrisons lost almost 5 per cent or 14.6p to 280.9p after it emerged that chief executive Marc Bolland was leaving to take over the same position at Marks & Spencer, which, with a 5.9 per cent or 21.7p rise to 390p, was perched at pole position on the FTSE 100.
Analysts welcomed the news, with Execution's Caroline Gulliver saying that while Mr Bolland lacked experience in the clothing and online arenas, "his motivational leadership style and FMCG [fast moving consumer goods] marketing experience should stand him in good stead".
James Monro at S&P Equity Research also welcomed the news, saying: "Bolland will take over faced with what could be a potentially very difficult 2010, but we believe it offers a very good opportunity for new blood to reinvigorate M&S."
Changes were also afoot at ITV, up 1.8p at 53.75p, which announced the appointment of the former Asda boss Archie Norman as chairman. Royal Bank of Scotland said the news should be well received by investors, noting that besides his track record in business, Mr Norman, a former Tory MP, "is also politically well connected with the Conservative Party, which could prove useful given they are potentially the new UK government and that ITV could benefit from deregulation".
Back on the upside, and Cadbury, up 9.5p at 797.5p after climbing as high as 802.5p at one point in the day, was in focus after Hershey and Ferrero responded to speculation regarding a possible joint offer to trump Kraft's advance. In separate statements, the two companies said they were reviewing their respective options, adding that there was no certainty that any proposal will be forthcoming.
Ladbrokes rose to 133.1p, up almost 5 per cent or 6.1p, after Bank of America Merrill Lynch weighed in, upping its stance on the stock to "buy" from "underperform" on the view that the worst may be past in terms of recent customer-friendly football results that have pressured margins. "The proportion of draws has risen through the season which should lead to a normalisation of margins," the broker said, revising its target price to 160p, compared to 140p previously.