Market Report: City reheats Premier Foods bid rumours

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Rather than cooking up a tasty culinary delight, the City's traders are reheating leftovers with more talk of a deal involving Premier Foods. The stock has been the focus of some chit-chat this week, with talk of Kraft hiving off divisions of the group. Yesterday, the rumour was that a bidder was targeting the whole company, with a bid worth a reported 45p a share in the offing. The market took it with a pinch of salt, and the stock edged up less than 1 per cent to 30.25p.

The FTSE 100 failed to elicit too much enthusiasm yesterday, as gossip was at a premium. It slipped slightly lower, then slightly higher, without raising the pulses too much, and ended up 24.95 points to the good at 3,925.3.

The index was helped up by mining groups, which displayed some strength after falling commodity prices had prompted a slide in the sector. The stock flexing the most was Eurasian Natural Resources Corporation, the Kazakh miner, which pumped up 16.93 per cent to 480p. The gain was prompted by an upgrade from Bank of America, which predicted a rise in demand for chrome, ENRC's core metal, and upgraded its recommendation from "neutral" to "buy". Rival miner Kazakhmys also saw strong growth, up 9.29 per cent to 397p.

Man Group enjoyed a stellar performance in the morning, despite the giant hedge fund's prediction of a 43 per cent drop in full-year pre-tax profit for 2009. While this would mean a slump to $1.2bn, analysts backed the group's outlook as well as its decision to maintain the dividend. Evolution Securities said: "Man has had a bad year but is in very strong shape. Cash is strong, funds are stabilising and it remains a highly profitable business. The relaunch of the institutional business in a new form is a clever bit of marketing capitalising on Man's strengths." The shares weakened at the close, but were up 5.54 per cent to 219p.

Barclays made further gains, climbing a further 13.53 per cent to 140.1p after backing from house broker Credit Suisse, which said it remained its "preferred UK bank". The potential sale of its iShares business and the group's capital adequacy led the broker to up its 12-month target price from 110p to 170p.

In the morning, Intercontinental Hotels Group took a smack in the face, crumbling to the base of the index. It was also the focus of a Credit Suisse note, which downgraded it to "underperform" from "neutral" blaming the fundamentals of the industry. IHG recovered to finish down 2.16 per cent at 520.5p.

It was replaced at the bottom by British Land, as property stocks wobbled following downgrades and news elsewhere in the sector. The shares fell 4.53 per cent to 352.75p, with one market maker saying it had fallen victim to profit taking after a good run.

Weakness in the retailers dragged on the index, with B&Q owner Kingfisher suffering after announcing a "very challenging" year ahead. The group met expectations with a full-year pre-tax profit of £368m, but added profits would fall about 12 per cent next year. Despite backing from broker Seymour Pierce, which said it was one of the most likely targets for the US retailers, the stock fell 2.32 per cent to 139p.

The market turned its back on the defensive stocks after strength on Wednesday, and companies such as United Utilities suffered from investors moving to lock in profits. It fell 2.74 per cent to 496.5p.

There was a solar eclipse on the second tier as renewable energy concern PV Crystalox Solar tumbled to the foot of the index. The group, which makes multicrystalline silicon ingots and wafers for use in solar power generation systems, saw the lights go out, despite its pre-tax profits rising more than 100 per cent to €147.2m (£138m). Some put the 10.06 per cent fall to 76p down to the outlook for an uncertain 2009 which is unlikely to see positive growth. Its peers across Europe, such as SolarWorld and Conergy, also sank as sentiment turned on the sector.

Travis Perkins was also on the slide after a downgrade from RBS. The broker expects Travis to launch an equity issue to raise £350m to cover potential covenant breaches. The shares closed 5.57 per cent to 419.25p.

At the other end, Northern Foods took the plaudits, munching its way 8.89 per cent higher to 49p. It pleased the market, saying its fourth-quarter revenues were up 8.8 per cent on the previous year, and full-year pre-tax profit would hit expectations. Shore Capital called it a "good news update".

At Aquarius Platinum, investors backed a move to raise cash. The group will use the funds to ease debt and support its £63m offer for Ridge Mining. The placing and accelerated book-build hopes to raise at least $80m (£55.4m), and the miner could then launch a rights issue and convertible bond. Evolution said the move was sensible and put its sell rating under review as the stock rose 13.04 per cent to 208p.

A disastrous day for Songbird Estates, which sang like a canary that it could breach its covenants in the next year. One trader said: "We have been expecting this for a while. It is pretty likely to breach its covenants." The group, which owns most of Canary Wharf, swung into a £1.8bn pre-tax loss from a profit last year, and said it could well breach its covenant test in November. It isn't quite a dead parrot yet, but Songbird looks decidedly sickly after it fell by 18.8 per cent to 27p.

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