Market Report: City spends energy on oil and gas talk

Oil and gas explorers on both sides of the Channel were flaring up on City takeover chatter. BG Group has been a takeover target since its shares lost around 20 per cent after warning on production forecasts at the beginning of the month.

The group is said to have hired bankers Rothschild and Goldman Sachs to help it handle any hostile takeover attempt. And the latest City whisper is that a bid is about to be put to these advisers.

Speculation previously linked Brazil's energy giant Petrobras and Royal Dutch Shell to the group. But City traders were also busy connecting Shell to another oil and gas group – French oil explorer Etablissements Maurel et Prom.

Exane BNP Paribas' Special Situations team reckon Maurel's boss, Jean-François Hénin, has a "major incentive" to "sell the company" before June next year and China's Sinopec Group (China Petrochemical Corporation) has already been rumoured to be in talks. Traders have floated a share-price target of between €15 and €20. Shell's interest is said to have been piqued by Maurel's African holdings including those in Gabon and Mozambique.

BG Group surged 11p to 1,031p. Shell ended down 3.5p to 2,132p. Maurel edged up €0.15 to €11.72.

Still on the Anglo French theme – Nomura's analysts took a look at Kingfisher.

They admit that the UK may be cutting back on DIY jobs, but despite sales in the UK dropping, the domestic market is still offsetting declines at retailer Kingfisher's French businesses of Castorama and Brico Dépôt.

Nomura's Sunita Entwisle retained her "hold" rating on B&Q owner Kingfisher and said: "Market data suggests that DIY in the French market has weakened with consumer uncertainty following the new budget and a fall in housing starts given changes in buy-to-let incentive plans."

But she thinks the UK has fared better and "with further cost savings and gross margin gains … estimates UK earnings of £61m".

Kingfisher will update the market with third-quarter results next week.

The French market is looking ever weaker and Ms Entwisle said that if the weak trade "drives further cost savings and self-help measures, we think there could be upside to our discounted cash flow valuation".

She gave the stock a share price target of 287p. Kingfisher built up a 1.3p loss to 277.9p.

Kingfisher will have to realise there are still no signs of a French recovery – credit-rating agency Moody's downgraded France's triple-A rating, blaming an uncertain fiscal outlook and deteriorating economy. It reduced its sovereign credit rating by one notch to AA1.

With the eurozone crisis back in focus and a crucial meeting on Greek debt underway the FTSE 100 index saw a volatile day of trade. But it recovered morning losses when news that a ceasefire in Gaza was imminent lifted investor sentiment. The benchmark index ended up 10.44 points to 5,748.10.

The luxury goods brand Burberry was back in fashion and traders put its 33p gain to 1,247p down to short sellers in the stock being squeezed.

Hotels group Intercontinental Hotels booked in a place toward the top of the Footsie after analysts at Barclays Capital raised it to overweight and gave it a share-price target of 1,825p, up from 1,730p, on the hope it will sell some of its assets. Its shares checked in a 43p gain to 1,633p.

On the mid-cap index, platinum miner Lonmin completed its $817m (£513m) rights issue and listed 365,497,663 new shares. The shares closed the day before at 515p but were up more than 13 per cent on the day – closing up 36.77p to 310.7 p – above the theoretical ex-rights price of 274p.

Analysts at Panmure Gordon gave it a "buy" rating and said: "Our new (ex-rights) target price of 506p... with balance sheet uncertainty now addressed we believe (the current share price) provides an excellent entry point for new investors."

Scottish-based Energy Assets reported a 38 per cent jump in first-half profits and unveiled a contract with Dong Energy to supply its industrial and commercial customers. The gas meter specialist's shares ticked up 7p to 191p.

A profit warning from BrainJuicer sent the online market research group to the bottom of the Aim index, losing 99.5p to 256p.

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