Market Report: Kingfisher soars on talk of bid from the US

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The Independent Online

The market spent the morning bird watching yesterday, as a flock of bid rumours sent Kingfisher soaring to the top of the FTSE 100. The retail group, which owns hardware chain B&Q, flew almost 10 per cent at one stage, as talk emerged of private equity interest. This followed stories of a bid of 225p per share from the United States, some naming Best Buy and others Home Depot.

The offer would value Kingfisher at £5.17bn, although the bid is still well under its 12-month high of 272p following the consumer slowdown. One trader said he was "fairly sceptical about the talk, but we have been surprised in the past". The stock retreated as that scepticism took hold and it closed up 3.69 per cent at 151.7p.

The chat provided some welcome relief for those flagging retailers in the morning. Home Retail Group, which operates B&Q rival Homebase, lifted 3.3 per cent although it ended just 0.47 per cent higher at 26.75p.

The clothing chain Next looked sharp as it rose 1.47 per cent to 1,309p, to continue the resurgence after nearly falling below the psychologically damaging £10 barrier last month.

The FTSE 100 opened in relatively buoyant mood on a sunny Monday in London, rising 47 points, but dipped after the release of the core producer price index, which one market expert called "abysmal". Many traders' minds were outside in the sunshine as the volumes were weak all day, and the index closed up 15.9 points at 6,220.6 on 600 million shares traded, after briefly falling into the red.

The oil companies were filling their boots as crude oil prices continued up. The pick of the slicks was Cairn Energy, which overtook the retailers to claim top spot late in the day, up 4.03 per cent at 3,481p.

Most of the miners were also up with the commodity prices, except for one. Kazakhmys sunk like a lead balloon to the bottom of the blue chips, although it staged a rally to close down 0.73 per cent at 1,773p. The plunge followed Friday's announcement of its rejection of the approach from Eurasian Natural Resources Corporation. ENRC had made a bid valuing Kazakhmys shares at about 1,550p, which was rejected as being well below the stock's price in the market. Lehman Brothers said the low offer was meant to pressurise Kazakhmys' share price "to demonstrate that the current market price of Kazakhmys shares include a substantial takeout premium". ENRC, whose shares were up 2.22 per cent at 1,336p yesterday, has until Friday to make a binding offer before hitting the "put up or shut up" deadline.

Looking hungover at the bottom of the index was the pub chain Whitbread as Morgan Stanley cut the group's target price from 1,900p to 1,700p. The stock ended 2.22 per cent lower at 1,364p as the US broker wanted to factor in a potential UK slowdown into its forecasts.

The back-up power company Chloride was sparky after a bid approach sent the stock rampaging up the second line, closing up 34.6 per cent to 280p. The group confirmed it had rejected a £657m bid from Emerson Electric, the US industrial conglomerate, but the market feels there is more to come, including a potential bidding war set to unleash.

Another strong performer on the mid tier was Southern Cross, the care homes group, up off the back of solid interim results. Brokers including UBS and Brewin Dolphin weighed in with their support, sending the shares up 5.95 per cent to 383p at the end of the day.

Investors were looking to sell property yesterday. One of the worst hit was Bovis Homes Group, which ended down 5.5p at 482.5p. One sales trader said that property-related stocks were hit by the pessimistic report out from the Royal Institution of Chartered Surveyors. The survey found sentiment in the UK housing market was at its lowest ebb since records began in 1978.

Down in the basement, traders and market makers were pulling on the rosy spectacles yesterday, with one saying "the small-cap market is not down and out by any means". Several pointed to lines of stock being cleared in Sterling Energy, which finished up 8.33 per cent at 13p. Another was Ascent Resources, which rose 16 per cent to 7.25p on three times the volume. "It looks as though the small caps could be back at the expense of the FTSE 100," he added.

Top at the end of the day was Island Oil & Gas, which climbed 42.86 per cent to 30p as it agreed to sell its Netherlands business to Delta Hydrocarbons for $25m (£12.8m). Island said it would reinvest the capital in its portfolio and pay down debt.

The worst on the day was Colliers CRE after warning on full-year profits. The real estate advisory company slumped 17.45 per cent to 61.5p as it revealed first-quarter revenues had fallen and said that investment activity in the UK will remain depressed for at least the rest of the year.

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