Market Report: New takeover talk fails to give helping hand to S&N

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The Independent Online

Familiarity breeds contempt, as Smith & Nephew (S&N) found out yesterday after the return of takeover talk failed to persuade investors to go out on a limb for the prosthetics manufacturer. The group dropped for the sixth straight session even though City analysts were reheating the familiar idea that it may be snapped up by a predator.

Morgan Stanley's Michael Jungling was the source of the speculation, after he suggested the medical technology industry was about to face a period of consolidation thanks to being hit by government penny-pinching around the world. As a result, he argued, "the greater importance of economies of scale... will either make S&N an acquisition target, or it will need to acquire."

A frequent subject of takeover gossip, reports at the start of the year claimed the company had been the target of a failed 750p a share approach from the US healthcare giant Johnson & Johnson.

Yet the latest talk failed to stop S&N closing 7.5p worse off at 556p last night, extending a slide that has not been helped by a recent roundtable meeting with analysts, attacked by Credit Suisse earlier in the week as "rather uninspiring".

Overall, the FTSE 100 set a rather unwelcome record by finishing in the red for the seventh day in a row – its worst run of consecutive losses since January 2003. The top-tier index dipped 67.04 points to 5,139.78 following a disappointing German bond auction, while Wall Street was pegged back amid mixed economic data ahead of today's Thanksgiving holiday.

A number of stocks were losing their payout attraction, including Man Group (down 13.8p to 123.6p) and the world's largest cruise company Carnival (down 50p to 1,990p). The former ended the session as the worst blue-chip performer, with the hedge fund manager shifting to its lowest share price for over a decade.

Cairn Energy retreated 6.5p to 266p in the wake of vague speculation suggesting the oil and gas group could be about to unveil a rather disappointing update from its controversial Greenland operations. If true, it would undoubtedly be welcomed by Greenpeace – which has targeted the explorer over its drilling in the area – although dealers urged caution regarding the whispers.

Bad news from China predictably translated into the heavyweight miners moving south. After data from the country showed manufacturing activity dropping to a 32-month low, Rio Tinto and BHP Billiton – both of whom were not helped by Australia's mining tax being approved by politicians – slumped 69.5p to 2,985.5p and 24.5p to 1,741p respectively.

Having lost over three-quarters of its share price on Tuesday after admitting it needed yet more cash, Thomas Cook found itself near the other end of the FTSE 250 yesterday. Yet despite the tour operator bouncing 0.92p – or 9.02 per cent – to 11.12p, it has still shed over 80 per cent of its share price in less than a month.

There was much more positivity around its rival Tui Travel, however, which also fell earlier in the week in sympathy with Thomas Cook's problems. It managed to more than cancel out that slide by ticking up 17.3p to 154p after Peel Hunt's Nick Batram said its peer's woes were likely to provide an opportunity for it to gain market share.

Meanwhile, analysts from Morgan Stanley revived bid talk around Tui, reminding investors that its parent company, Germany's Tui AG, may still make a move to purchase the shares in the group it does not already own.

It was another bad day for the High Street, with Dixons Retail ending up with the wooden spoon. It was driven back 1.19p to 9.36p as investors deserted the electricals chain ahead of the release today of its interim results.

Halfords, meanwhile, jumped down 16.8p to 314.1p after UBS cut its rating to "sell", with analysts from the broker warning that "new avenues for sales growth need to be identified" for the bicycle retailer. Mothercare was also hit by a downgrade, as HSBC reduced its advice to "neutral" from "overweight", and it slipped 7p to 130.1p.

JD Sports Fashion certainly wasn't helping the mood by warning it was facing a "tough" Christmas period, and with the retailer admitting it had seen a steep drop in sales growth recently, it shifted back 55p to 760p.

An announcement that it was involved in funding talks as it only has enough working capital to keep it going until the end of the month meant Cosalt was suffering a torrid time on the fledgling index. Despite some in the Square Mile suggesting it could be close to finding a funding solution, the marine safety group – which was the subject last week of a lowball bid worth 0.1p a share from its non-executive chairman David Ross – was still knocked down 41.18 per cent to 0.25p.