Market Report: Icap brokers a rise on Middle East investor talk

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The inter-dealer broker Icap was boosted by speculative buying yesterday as early-afternoon rumours suggested the company had attracted the attention of a Middle Eastern investor.

The speculation suggested that the investor had snapped up, or was about to snap up, a significant stake in the company, possibly buying as much as 10 per cent of its shares.

"The rumours are about a sovereign fund or some other state-backed investor," said one market source. "It may be coming from Dubai or from Qatar – both are interested in financial services."

The chatter took Icap stock up to a high of 598.5p. By the close, the shares had eased back to 594p, up 4.39 per cent or 25p.

Overall, the FTSE 100 gained 150.5, or 2.6 per cent, to 5,852.6. The London benchmark was helped by new figures from the UK's Chartered Institute of Purchasing and Supply, which said its purchasing managers' index registered a reading of 51.3 in March, the same as its reading in February. The figure was better than expected and, later in the day, was supplemented by new numbers from the US, where the Institute of Supply Management said its index of manufacturing activity rose to 48.6 per cent in March from 48.3 in February. The ISM index, while still indicating a contraction in the US manufacturing sector, was also ahead of market expectations.

The FTSE 250 rose too, gaining 323, or 3.2 per cent, to 10,336.2.

On the FTSE 100, the banking sector rallied in reaction to the latest multibillion-dollar writedown at the Swiss giant UBS. The surge, borne of investor hopes that the worst of the sub-prime-inspired skeletons had finally been revealed, took HBOS up by almost 8 per cent or 44.5p to 604.5p, earning it first place on the FTSE 100 leader board.

Royal Bank of Scotland claimed fifth place, climbing by 23.75p to 361p, while Alliance & Leicester was heavier by 34p at 552.5p. Other banks on the way up included Lloyds TSB, which rose by 29.25p to 480.25p, Barclays, which gained 27p to 480p, and HSBC, up 31p to 861p.

The mining sector, meanwhile, dropped off its recent upward trend and fell by the wayside. Stocks were depressed by a strong dollar, which prompted an easing in the cost of commodities. Simon Denham at Capital Spreads said that "for the first time in quite a while, the downside looks more probable than the up."

He added: "With the dollar having quickly reached quite extreme levels (rather than engaging in a long, slow, decline) the potential for further currency-induced strength in the dollar-denominated commodities has been somewhat reduced."

Lonmin, the world's third largest primary platinum producer, was the worst off. Its shares slumped by 75p to 2,996p, claiming first place on the FTSE 100 loser board. Xstrata was the third worst on the FTSE 100, shedding 53p to 3,474p. Other off-colour miners included Anglo American, down 44p to 2,984p, Antofagasta, which shed 10.5p to 690.5p, and Kazakhmys, which lost 4p to 1,593p.

Renewed bid talk was evident around British Energy, which ended the day up 0.5p at 653p. Market speculation suggested that the rival RWE was about to make an offer for the company. The chatter also suggested that the British Gas owner Centrica may draw on the support of other energy companies to counter a bid from RWE.

EDF Energy and E.ON were proposed as possible partners in a rival offer by Centrica, which closed up 4.75p at 303p.

The consumer goods giant Unilever drew some mileage out of a positive note from Deutsche Bank, gaining 52p to 1,751p. Upgrading the stock to "buy" from "hold", Deutsche Bank analyst John Parker wrote that he expected "a strong rebound" in the company's first-quarter performance, adding: "For the first time in years, 2007 saw both margin and sales progress: in 2008, we could also see market share gains."

On the FTSE 250, the bingo club and casino operator Rank was a prominent feature in market chatter. Investors were reacting to reports that the Malaysian gaming group Genting was about to approach the company with a 124p-per-share offer. Speculators soon pounced on the news, suggesting another bid might be in the offing. No name was suggested, nor was there any indication about the price likely to be offered in any alternative bid. The talk took Rank up 8.75p, or nearly 10 per cent, to 97p.

On AIM, the retailer Land of Leather was hurt after it said Sleep Depot, which operates 71 concessions in its stores, was about to go into administration. The retailer said it earned £4.8m in annualised rent for the concessions and that as a result of Sleep Depot's administration it will lose £1.6m in rent for the remainder of its financial year, which ends in August. The news sent Land of Leather shares down 4.75p to 49.25p.