Market Report: Regulation fears cause PartyGaming to drop

Fears of Europe being hit by strict regulations on internet gambling caused one of the sector's biggest names, PartyGaming, to take a tumble last night.

The Gibraltar-based firm is set to merge with the Austrian company bwin in the first quarter of 2011 to create what would be the world's largest online-gambling company, but Davy has revealed that it is worried about the fact that key markets are expected to introduce regulations which could result in uncertainty around the stock.

"We have become increasingly concerned about the impact regulation of European markets will have on bwin-PartyGaming as they make the transition from unregulated to regulated markets," said the broker, which downgraded both companies to "underperform". "In theory, the regulation of European markets should be a good thing for online operators.... The problem arises when one or more products are prohibited under new regulation or when tax rates are prohibitively high."

Following the research, PartyGaming ended the session on 239p, a drop of 13.5p. It has endured a rough run recently, with the US midterm elections preying on the minds of investors. Democrat Harry Reid, a supporter of the gambling industry, has found himself in a battle to retain his US Senate seat for Nevada.

Overall, the FTSE 100 ended yesterday up, adding 62.81 points to finish on 5757.43, despite news from the construction sector that growth was at its lowest for eight months. For the second time in five weeks, traders using the London Stock Exchange's trading system Turquoise faced technical difficulties, after it suffered a "networking-related issue" that put it out of action for two hours. The LSE is about to move its main trading platform across to Turquoise's new technology.

There were many oil and gas companies amongst the risers on the top-tier index, with Tullow Oil, up 48p to 1,219p, leading the way. BP's much-anticipated figures saw its price put on 7.65p to 431.65p, and BGC Partners' David Buik said that yesterday suggested that "though still in remission, [BP] is on the road to recovery and in a couple of years' time should be back on the straight and narrow".

Benefiting from the strong performance in the sector was Weir Group, which makes pump and valves. On Monday it was among the stragglers despite announcing a 232 per cent increase in orders from its oil and gas business, but yesterday was a different story, and it rose 45p to 1,582p.

BHP Billiton was also up, enjoying an 42p increase to 2,277p, after rumours that its hostile takeover attempt of Potash would be blocked. Canada's Federal Government is deciding on whether to approve the bid, and industry minister, Tony Clement, yesterday said no decision had yet been made, with the deadline today. BG Group posted an impressive third-quarter update in which the natural-gas producer said that it had achieved a 12 per cent rise in net profit for the third quarter, above analysts' forecasts. It also increased its estimate of the amount of removable resources in its Brazilian fields, and thanks to the good news, it advanced 41.5p to 1,252p.

At the opposite end, Serco claimed last place for the second day in a row, down 21.5p to 565.5p, but it was pushed close by Lloyds Banking Group whose trading statement – although generally positive – did give investors reason to worry about impairments from bad loans;. It retreated 2.21p to 67.39p.

On the FTSE 250, even as the consultancy firm RPS Group shot up to the top of the mid-tier index, traders were dampening down hearsay that it was a possible takeover target, with one bemoaning the fact that there "seems to be a different bid rumour every day at the moment". Instead, he pointed towards RBS raising its advice on the firm to "buy" from "hold" as being behind its 15.6p climb to 221p.

A slightly mischievous note on Daily Mail & General Trust from Citi suggested that the media group – whose stable of publications include Metro as well as the newspaper that graces its title – should consider changing its name "to better reflect its faster-growing, higher margin B2B assets". Despite no signs of a change of moniker quite yet, the broker did move the company's target price up to 660p, and it advanced 15.5p to 560p.

Among the small caps, Tribal Group suffered a massive loss of 19.75p to 39p after it confirmed all discussions with possible bidders for the outsourcers had ended and that "each party has confirmed that it is no longer pursuing an offer for the company".

On the Aim, the announcement by Desire Petroleum that it was giving up on a sidetrack well on its Rachel prospect off the Falkland Islands did not put off the market, as the explorer – which last week was the subject of takeover speculation – rose 9.5p to 101.5p. Gulf Keystone progressed 24.5p to 191p yesterday after it became the subject of rather unclear gossip over a possible bid, although this is by no means the first time speculation has surrounded the oil explorer.

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