Market Report: Deal chat and data mark the end of silly season

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The Independent Online

After a painfully slow few weeks, the market was buzzing again yesterday, driven by takeover chat. It looked like traders had returned from their holidays with renewed vigour as volumes leapt on several tall tales – such as talk of a suitor running the slide rule overthe IT giant Autonomy – taken with several handfuls of salt, and strong economic data out of the US and China.

While the IT group was up 71p to 1,580p, it was hardly a standout on a strong day yesterday. In the end, several others in the takeover spotlight gathered more support. Cable & Wireless Worldwide (CWW) shares spiked following chat the previous day, rising almost 13 per cent in the morning. Names linked with a move include the US giants AT&T and Sprint. While enthusiasm waned slightly, the telecoms group still finished top of the blue chips, gaining 5.15p to close at 71.95p. The sector was also helped by the positive read across from Vivendi. The European telecoms and media group raised its outlook for the full year.

Talk of a takeover in another FTSE 100 company emerged from Germany in the morning pushing Tui Travel right in behind CWW. The travel group soared 15.1p to 216.4p on talk that its majority shareholder Tui was set to make an offer for the 42.5 per cent it does not own. Nick Batram, analyst at KBC Peel Hunt, said Tui's desire to buy up the UK company "is clearly well known", suggesting an offer of above 250p per share would bring Tui Travel's independent shareholders on board.

There was yet further talk doing the rounds, this time in the mining sector. Reports in the morning had historians sighing as – yet again – Fresnillo was linked to a bid by the Mexican billionaire Carlos Slim. Shares in the stock rose close to all-time highs before support evaporated. It closed up 29p at 1119p. This was backed by a general rise in the miners after strong economic data to come out of China, which revealed the economy returned to growth in August after slowing in the previous months.

The bounce from China also led up the FTSE 100. It was then given a further push by better than expected manufacturing data from the US. It closed up 2.7 per cent, or 141.1 points to 5366.4. The only stock to close in the red was Randgold Resources, despite support from the broker Collins Stewart, which gave up 70p to finish at 6010p. One market expert said: "There should be an uptick in the next three months, although October is notoriously volatile."

InterContinental Hotels Group, the biggest faller on Tuesday's session, bounced yesterday as it received backing from Morgan Stanley. Analyst Jamie Rollo upgraded his rating to "overweight", saying the shares were trading at an unjustified discount to its peers. He added: "We see the company as a solid long-term winner due to its high-margin, low-capex, fee-based model, a substantial pipeline and high real-estate backing." Yesterday, it rose 61p to 1,043p. A report on the property sector from JP Morgan helped drive up Land Securities, which it named its large cap pick, saying it was the best positioned across the sector in Europe. The broker also lifted its price target at British Land from 515p to 54p, maintaining its "overweight" rating, which sent the shares up 13.5p to 469.9p. The move to downgrade Helical Bar on the second tier – reducing its price target from 370p to 320p and downgrading it to "neutral" in the wake of its results – knocked its shares in the morning. It crawled into the black at the close, up 0.5p at 285.5p.

In the wider market, another day proved to be another wreckage for Accident Exchange Group. The group, which replaces vehicles for drivers who are involved in accidents that were not their fault, had lost a quarter of its value on Tuesday. It went plunging right over the precipice yesterday, losing 63 per cent of its value. This followed an update on discussions with lender Morgan Stanley over its £40m credit facility, which falls due at the end of the month. No agreement has yet been reached but a debt for equity swap is in the offing which would dilute the existing shareholders' holdings. The shares closed down 6.5p at 3.75p.

Meanwhile the car dealer Vertu Motors was revving up, which pleased investors with a trading update saying half-year profits were "materially ahead" of the previous year. Shares in the group rose 0.5p to 26.25p. The group also added that acquisitions carried out last year had contributed positively to the first-half results.

Results released by IQE yesterday also found favour. The group, which provides advanced wafers to semiconductor companies, posted record interim numbers. Growth in its wireless division, driven by the rampant rise of smartphones including Apple's iPhone, was particularly strong. Shares in the company rose 2.75p to 28.25p.

Emblaze's shares were smoking hot as the Israel-based group revealed it was in advanced talks with an unnamed bidder to sell its Formula Systems arm. The company, founded by the dotcom star Eli Reifman, hit the headlines in July after it accused Apple of infringing on one of its video streaming patents. The shares rose 7.5p to 49p.

Elsewhere, Johnson Service shares rose 3.5p to 20p after posting its half-year report. The dry cleaning to workwear group posted a 17 per cent hike in first-half profits, adding that it remained in a good position for the rest of the year.

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