Market Report: Gossips back BHP move for BG as oil right

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The Independent Online

As fear stalked the market in recent days, scurrilous gossip dropped off the radar. It returned with a vengeance yesterday: BHP Billiton, which failed in an attempt on rival Rio Tinto, had another giant in its sights, but this time it was oil and gas company BG Group.

Marius Kloppers, the boss of BHP, has publicly stated his desire to expand BHP's not insignificant petroleum business. The group also has the cash, and room on its balance sheet, for the potential debt for such an acquisition, one trader specialising in natural resources said. "You don't have to squeeze this story hugely to make it fit," he said. "If the market gave it much credence, BG would probably be up more." It closed up 17.5p at 1112p. BHP, which was preparing to put out its half-year results from Australia, closed up 28.5p at 1885p.

It was a day for the miners, led up by Xstrata, the day after chief executive Mick Davis had pleased investors with a bullish prediction for 2010. Support from Morgan Stanley pushed it up 44.7p to 1028.5p, the top riser on the FTSE 100. The US broker said the "risk-reward [is] highly compelling – pull-back presents a medium-term buying opportunity: the 105 per cent upside to our bull case of £19.44 looks too compelling to ignore".

The FTSE 100 started weakly as it was dragged down by the US overnight. The Dow Jones closed below 10,000 points for the first time since November, with financial stocks hit by the ongoing uncertainty of sovereign debt in the eurozone. The US rallied yesterday, however, along with the financials in London, with the top index closing up 19.51 points to 5,111.84.

Concerns over the eurozone receded slightly, and Lloyds Banking Group was the sector pick, up 1p to 48.2p. The banks were helped by John Varley, the head of Barclays, who told the Treasury Select Committee the worst was over. He said: "The meteorite passed without striking, thank goodness, and I think that the system today, although it's not in rude good health, as a result of intervention by government and central banks... survived."

On the downside, SABMiller gave up 30p to 1669p as MillerCoors – the combination of its US operations with that of Molson Coors Brewing – saw income slide 21 per cent in the fourth quarter.

Rightmove stormed to the top of the FTSE 350 following an unscheduled update. The property website advanced 40p to 565p, after it said 2010 profits would beat expectations based on strong January trading. Canaccord Adams lifted its target price from 635p to 658p with a "buy" rating.

The sunshine departed for PV Crystalox Solar, as a KBC Peel Hunt note cut its recommendation to "hold" from "buy" saying selling prices continued to fall. The group, which makes wafers for solar panels, fell 1.47p to 48.93p.

Among the small caps, Wolfson Microelectronics was up despite a widening loss in the fourth quarter. The chipmaker's management, led by Mike Hickey, said demand from South Korea would boost revenue this year. While the fourth quarter suffered after Apple dropped its chips for the latest iPhone model, the company's prospects were backed by Citigroup. The US broker repeated its "buy" rating, saying: "Investor attention should now turn towards the strong level of design wins Wolfson has achieved with new products over 2009, the majority of which we expect to start shipping in 2010."

Clean Air Power had a positive 1.5p rise to 23.5p as it signed a development deal with Navistar to create an engine for North America. The company develops dual fuel combustion technology so that engines can operate on diesel and natural gas.

Investors backed 888 Holdings, the gaming group, as operating income soared 14 per cent year-on-year in the fourth quarter. While full-year operating income fell 6 per cent to $247m, the company said customers were up 24 per cent over the end of 2008 to 7.1 million. Optimism for 2010 helped sent the shares up 0.7p to 103.5p.

Also up was Alphameric, the bookmaking technology company. The group swung to a £7.9m profit for 12 months to the end of November, after a pre-tax loss of £2.2m the year before. The profits were driven by its horse racing joint venture, which provides TurfTV to betting shops. The shares rose 0.5p to 27p. Investec upgraded to "buy" on valuation grounds, and added the resignation of the chief executive Alan Morcombe "will not come as a shock to many investors".

Another company to lose its chief executive didn't fare quite so well. Spice, a FTSE 250 utility support services group, slumped as its founder, Simon Rigby, quit. The shares fell 1.25p to 49.25p, as Kelda's chief financial officer Martin Towers stepped in to hold the fort in the interim.

Among the worst small cap performers was telecoms equipment marker BATM Advanced Communications, which had given up more than 15 per cent the previous session on weak results. It was down again yesterday, giving up 2.25p to 43p.

Also on the downside, but on Aim, was Atlantic Coal. It retreated after completing a placing to raise £400,000. The issue represented 5.5 per cent of the enlarged share capital as it looks to reinvest at the colliery in Pennsylvania. The shares fell 0.125p to 0.575p.