Market Report: Man Group rises on Barclay bid rumours

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The Independent Online

If merger mania is not exactly back in vogue just yet, then we certainly had rumour rage in the markets yesterday. Man Group was back on the FTSE 100 leaderboard, up 3.2 per cent at 305.6p, as gossip centred on speculation that Barclays may be lining up a bid for the world's biggest hedge fund group. Man has seen its share price increase by 53.4 per cent in the past six months, but it is still well below its year highs of 548p, suggesting that Messrs Varley and Diamond, or any other suitor for that matter, are looking to strike a deal before any recovery in the Man's share price becomes entrenched. Barclays closed the day down 0.3 per cent at 369p.

The rumour mill did not stop at Man Group. There was also speculation that Italian oil and gas giant ENI was about to tempt Tullow Oil investors with a bid somewhere close to £20 a share. Tullow has seen its share price weaken in recent days after falls in the price of oil and political unrest in Uganda, where it has three licences. The group's stock jumped 1.2 per cent to 1,087p, outperforming the rest of the energy sector, which nevertheless inched forward by 0.7 per cent.

The FTSE 100 had a rather better day than a year ago, when 15 September earned the moniker "Meltdown Monday" after the index of leading shares fell to 5,204 amid news of the collapse of Lehman Brothers, having closed on the previous Friday at 5,417. The index closed up by a sliver yesterday, gaining 0.5 per cent to finish the day at 5,042.13. This was still more than 3 per cent lower than the close on Meltdown Monday, but its best level for 11 months.

BT closed the day at the top of the pile, rising by 4.4 per cent to 135.5p, after Ofcom said it could sell its voice, broadband and television services as a bundle of packages, as its competitors do. The former state-owned company no longer has undue market power, the regulator said.

The energy generation group International Power carried its strong momentum of the past few weeks with it. The shares closed 2.6 per cent higher at 296.6p and were no doubt helped by Morgan Stanley saying on Monday that it had moved to a 3 per cent overweight position on the energy sector.

Johnson Matthey was one of those vying with BT for the top spot all day, with the stock climbing 3.2 per cent to 1471p after trading poorly on Monday. The company was one of a number of chemicals groups to see a jump after Goldman Sachs said that "despite the weak economic environment in the first half of fiscal 2009, earnings were ahead of our expectations due to aggressive cost-cutting measures, lower raw material costs and, in some cases, sticky pricing". The experts upgraded Johnson Matthey from "sell" to "neutral".

Royal Bank of Scotland enjoyed better fortunes than it did a year ago. Shares in the majority taxpayer-owned bank rose 1.4 per cent to 55.75p as an EU investigation into RBS's receipt of state aid drew to a close. Despite yesterday's climbs, investors know the company still has an awful lot to do to regain trust and confidence. This point was highlighted yesterday by BCG Partners, whose research showed that RBS's share price is still a whopping 76 per cent behind its mark the day before the implosion of Lehman Brothers.

Despite the benchmark index finishing the day in positive territory, a number struggled. Home Retail Group, Kingfisher, Next and Burberry all ended up in the bottom 10 stocks. Growth in the retail sector has been hampered by disappointing trading figures in London, and sales sell 5.9 per cent in August, according to the British Retail Consortium. Home Retail fell 3.6 per cent to 283.1p, Kingfisher was down 3.6 per cent at 201.7p and Next dropped 1.2 per cent to 1699p. Burberry slipped 2.1 per cent to 461.3p.

The insurance sector also struggled after RSA Insurance, down 2 per cent at 123.5p, said it was considering spending up to £600m on acquisitions and it might well fund takeovers by selling new shares. Prudential (down 0.8 per cent at 555p) was also a laggard.

Rexam toiled as investor sentiment edged towards more cyclical stocks. The drinks can maker dropped 2.2 per cent 264p after Credit Suisse removed the group from its focus list.

The market's second division, the FTSE 250, pushed its more illustrious stablemate all the way, closing the day up 41.1 points at 9,164.24. Leading the way was the retailer Dunelm Group, which gave investors a fillip after announcing impressive full-year results. The group's shares soared by 11.1 per cent, closing at 310p, after it said sales were up 16 per cent and its dividend would rise nearly 10 per cent.

By comparison, another well-known retailer, Debenhams, was one of those bringing up the rear despite saying it was on course to meet its full-year forecasts. The department stores chain also said it was mulling acquisitions after raising £323m in June. The upbeat news did nothing for the shares, however, as the group slipped by 4.1 per cent to 81.55p

China Shoto, the Aim-listed battery maker, was one of the small-cap bad boys as it ditched its dividend, despite bumper half-year sales, to fund a recycling project. The stock fell 9.6 per cent to 216.95p.

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