Market Report: Murphy move fuels talk of bid for Kingfisher

Kingfisher, the specialist retail group which owns B&Q home improvement stores, was the feature of some bid speculation yesterday after news that its former chief executive Gerry Murphy was to join Blackstone, the American private equity giant. The company has suffered in the face of some sharp economic headwinds – B&Q saw a near 2 per cent decline in like-for-like sales in the fourth quarter – and has often been mooted as a likely take over target.

Last night's rumours suggested that, armoured with the benefit of Mr Murphy's advice (he led Kingfisher for five years), Blackstone might soon mount an attempt to buy the company. The speculation took Kingfisher stock to an intra-day high of 131p. By the end of the day, the shares had receded to 126.1p, up 0.1p.

The mining sector, driven by a spike in the price of metals, staged a market-leading rally yesterday. As platinum climbed to a new record and gold swung steadily toward an all-time high, the copper producer Kazakhmys claimed first place in the FTSE 100 leader-board, gaining 81p to 1645p, while Anglo American, which rose 79p to 3354p, and Vedanta Resources, which gained 47p to 2237p, were at fifth and seventh place on the leaderboard respectively.

The FTSE250-listed Ferrexpo received a boost from Citigroup, whose analysts initiated coverage on the company, advising investors to buy the stock. "Beyond the long-term potential from the development of the resource base that many of the other independent iron ore producers are also exposed to, the fact [Ferrexpo] is a producer means it is benefiting right here, right now from the strong iron ore pricing environment," Citigroup said. The recommendation swayed the market and the company's shares closed up 5.87 per cent, a rise of 19.25p, at 347p.

In other mining news, the long-drawn courtship of Xstrata by its Brazilian rival Vale was momentarily eclipsed by an intriguing rumour floating about at noon yesterday. The London-listed company, some suggested, was about to embark on a separate courtship of its own and attempt a takeover of Lonmin, the third-largest primary platinum producer. "Interesting but unlikely right now," said one trader. Investors agreed, and Lonmin shares, firm on the back of rising platinum prices, posted a relatively modest gain of 85p to 3437p. New reports from Brazil indicated that the Xstrata-Vale talks had stalled, sending the Anglo-Swiss miners stock down slightly, by 38p to 3962p. Overall, the FTSE 100 was down 50.90 points to 5,767.70. The index was depressed by, among others, banking and financial stocks, which continued to slide.

Worst off yesterday were the British motor insurer Admiral, which fell by 157p to 845p – almost 16 per cent of its value – on the back of market worries about the outlook for earnings, and the telecoms giant Cable & Wireless, which fell by 20.40p to 157p, a drop of 11.59 per cent, after it failed to impress analysts by unveiling ambitious new targets at an investor day.

Wall Street also weighed on the London benchmark and saw some early losses following gloomy comments from the US Federal Reserve chairman Ben Bernanke, who said that "delinquencies and foreclosures likely will continue to rise for a while longer".

The FTSE 250 was also down, by 69.40 points to 9944.50. On the FTSE 250, bid talk featured FKI, the engineering group which was courted with an approach from rival group Melrose last month.

The market was abuzz with speculation about the suitor's next move. Traders wondered whether or not Melrose, which is due to announce its results to the market today, would enhance its offer to see off a challenge from Blackstone, which is also believed to be interested in the company While the chatter did lift FKI to an intra day high of 75p, it failed to bear any lasting effect and the group's shares closed down 0.50p at 72.75p.

Elsewhere, positive broker sentiment to helped lift HMV by 2.75p to 130.25p. HSBC upgraded the stock from "underweight" to "neutral", adding: "Over the last decade, there has been a smoky aroma at HMV as its board has fiddled while the enter-tainment empire burned around them. No longer: under Simon Fox there has been a reassuring slaughtering of sacred cows (such as totally separate organisations for HMV and Waterstone's) and changes are being made with some alacrity."

On the AIM market, Oriel Resources, the London-based chrome and nickel mining processing company, climbed to the top of the AIM UK50 index after confirming an indicative offer from leading Russian mining group Mechel. The news, which comes against a backdrop of other moves toward consolidation in the sector, added almost 13 per cent or 12.75p to Oriel's shares, which closed at 112p.