Market Report: Respite for Rentokil after buyout speculation

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The Independent Online

It has clearly not been a happy Christmas for rat-catchers, as Rentokil Initial's value has headed for the sewers in the past two months. It enjoyed a rally late yesterday, amid rumours it was the target of a management buyout.

The group has shed 38 per cent of its value since November, but rose 2.6 per cent yesterday to 106.6p on the speculation. Traders said the chat was of a 155p per share for the deal. It proved a welcome respite for the stock after it warned on profits in December.

Thursday proved another jumpy session for the FTSE 100, which was up and down like a fiddler's elbow. The index rose 85 points in the morning, termed by David Buik of Cantor Index as a "classic bear squeeze" before it slumped 45 lower after lunch. It flirted with positive territory in the afternoon but ended 40.5 points lower at 5902.4. The final drag came from New York, which fell after Merrill Lynch became the latest bank to disclose mega writedowns, and bearish comments on the US economy from the Fed chairman Ben Bernanke.

The miners were the main drag on the market for the second day in a row. As metal prices receded over fears of weakening demand and a bout of profit-taking, Vedanta Resources ended up with the wooden spoon, down 6.63 per cent to 1,760p. It was followed by Kazakhmys, down 5.2 per cent to 1,131p.

The bubbly went flat for SABMiller after a trading update missed expectations. The brewing group finished close to the nadir of the blue chips, down 4.58 per cent to 1,187p as it announced volume growth had slowed in the third quarter.

On the plus side, Thursday heralded another solid day for property stocks. The positive newsflow was provided by Morgan Stanley, which expects the sector to rally by at least 20 per cent in the first half of the year. The US broker said the strength will be sparked by the Bank of England, which it predicts will cut UK rates by 100 basis points in a bid to avoid recession.

Its top property pick was British Land, which closed up 5.16 per cent at 968p.

The best blue-chip performer at the end of the day was AB Foods. The stock finished 8.13 per cent up at 838p after good Christmas numbers, especially in Primark, its budget fashion brand.

Oil-related stocks also dragged, retreating with the commodity's price this week, with the casualties in evidence on the mid tier. The exploration and production group Venture Production was the lowest sector stock of the day, falling 7.77 per cent to 65p. Also down was the oil equipment group Petrofac, 6.87 per cent lower at 474.5p.

Hikma Pharmaceuticals suffered in the morning, sinking 23.5p as it announced it had raised £81.6m in a placement of 17 million new shares. The issue represents almost 10 per cent of its issued share capital. It said the funds raised will reduce debts brought on by the $163.6m (£82.9m) acquisition of Arab Pharmaceutical Manufacturing Company announced last month. The company rallied to close down 5.5p at 493p.

Mid-tier property took its lead from the blue chips, with Barratt Developments the pick. The stock that fell from grace (well, the FTSE 100) late last year rose on a well-received trading statement and the Morgan Stanley Report. Barratt said margins had been in line with management expectations in the first half, with forward sales of £1.2bn. It closed up 9.99 per cent to 399p.

HMV Group was music to investors' ears for the second day in a row as it put out an unexpectedly robust trading statement. It rep-orted like-for-like sales growth of 9.4 per cent at the group. Support from Dresdner Kleinwort, which upped its rating from "hold" to "add", helped lift the retailer 17p, although it weakened to close 4p up at 105p.

Investors in Forth Ports are waiting on a bid from Babcock & Brown. The Australian group took a 20 per cent stake in the last independent UK ports operator this month, and a bid at around £24 per share was being talked up yesterday. Forth closed up 48p to 2146p.

Egdon Resources enjoyed its first day of independence, rising 46 per cent to 24.75p. It topped the AIM leaders after its demerger with Portland Gas, which closed up 10 per cent to 264p.

Elsewhere, Traction Tech-nology was boosted by news it had appointed a new chief executive. The stock, which makes hybrid engines for buses, has appointed Andrew Walmsley to head the group. It rose7.87 per cent to 24p as it also announced a contract with Merseytravel.

A well-received statement from Goldenport Holdings sent it steaming ahead 14.18 per cent to 346.25p. The shipping group said full-year results would be in line with market expectations.

A profit warning did for IBS Opensystems, sending it spiralling a quarter to 124p. The group provides software to local government and social housing markets. It said its revenues and profits would be short of analyst expectations.