Market Report: Return of bid talk helps Smith & Nephew

The revival of bid rumours, plus claims that investors are seriously undervaluing the artificial hips and knees manufacturer, helped Smith & Nephew (S&N) continue on its road to recovery yesterday.

The blue-chip group was hurt badly by the recent widespread sell-off, and although it has managed a partial rally in the past few weeks, it remains nearly 20 per cent lower than its recent peak in February, thanks in part to pessimism over the state of the orthopaedics market.

Last night, however, it closed 22.5p better off at 596.5p after reheated takeover chatter once again emerged suggesting its US peer, Stryker, could be interested in a possible move. Such speculation has been seen constantly around S&N for a while now, and it was reported to have rejected an approach worth over 750p a share from Johnson & Johnson late last year.

This time market gossips said any potential offer could be pitched between 850p and 900p a share, adding that if Stryker did move in, others were likely to follow. Traders refused to get too excited over the vague rumours, however, pointing out that they have heard similar mutterings plenty of times before.

Also helping S&N was Deutsche Bank's decision to start its coverage on the company with a "buy" rating, saying the fall in its share price had made it "too attractive to ignore".

"We think investors have over-discounted the temporary slowdown in S&N's sales and earnings growth outlook and have not priced-in material improvements in its ability to generate cash... or additional work it is doing to lift this further in the future," said the broker's analyst Yi-Dan Wang, who gave it a target price of 775p.

With global markets rallying on Monday as the City enjoyed the bank holiday, the FTSE 100 was eager to catch up yesterday and initially rose almost 3 per cent. Data showing a major fall in US consumer confidence, which dropped to a 28-month low, held the benchmark index back slightly, although by the bell it was still 138.74 points higher at 5,268.66.

The announcement this week that two of Greece's largest banks – Eurobank and Alpha Bank – are to merge gave some encouragement to the beleaguered sector. Saying the deal was "a step in the right direction", Nomura's Prathmesh Dave suggested it could spark further tie-ups in Greece as well as in Spain and Portugal.

So welcome was the news that in early trading Royal Bank of Scotland shot up over 13 per cent, before finishing 1.76p stronger at 23.64p, while Lloyds Banking Group climbed 2.32p to 32.03p. RBS was also given a boost by Deutsche Bank upgrading its advice to "buy", although the broker kept Barclays – up 10.4p to 165.4p – as its favourite choice.

In the wider financial sector, the insurers were enjoying the benefit of Hurricane Irene seemingly causing less damage in the US than had first been expected. JP Morgan Cazenove noted early estimates put the cost of the storm not far off $8bn while now it seemed as if it was not going to cause more than $3bn of damage, as Aviva ticked up 18.1p to 329.7p and Legal & General advanced 5.6p to 103.8p.

Vodafone underperformed the blue-chip index, edging forwards just 0.6p to 162.5p after confirming talks with its Greek peer Wind Hellas over "a potential business combination". Espirito Santo was keen on the move, saying that although "some observers may question whether Vodafone should be committing more capital to Greece... this is exactly the right point in the cycle, when valuations have been crushed."

Down on the FTSE 250, Tui Travel pushed forwards 4.7p to 154.4p as Charles Stanley's Douglas McNeill said the likelihood of its parent company Tui AG making a move for the rest of the company it does not own was being underestimated. The analyst claimed the tour operator's fall of nearly 40 per cent since May "implies virtually no chance of a bid", but he gave the scenario a 33 per cent probability of happening and upgraded Tui's rating to "buy".

Elsewhere, EasyJet flew up 13.5p to 337.8p as investors reacted with enthusiasm to reports over the weekend claiming the budget airline could be about to make a one-off special dividend payment.

There was a double boost for the housebuilders, with Bank of England figures showing an uplift in the number of mortgage approvals while Bovis – up 18.5p to 369.5p – managed a first-half pre-tax profit of £8.1m. That was more than double the same period the previous year, and as a result Barratt Developments advanced 6.05p to 78.9p while Taylor Wimpey powered up 1.3p to 31.76p.

Despite saying it was not in discussions over a sale of the company, Gulf Keystone still spurted up 5.5p to 136p on the Alternative Investment Market after reports over the weekend claimed the oil explorer's chief executive was considering such a move.

ebooksAn unforgettable anthology of contemporary reportage
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
Oscar Pistorius is led out of court in Pretoria. Pistorius received a five-year prison sentence for culpable homicide by judge Thokozile Masipais for the killing of his girlfriend Reeva Steenkamp
voicesThokozile Masipa simply had no choice but to jail the athlete
Arts and Entertainment
James Blunt's debut album Back to Bedlam shot him to fame in 2004

Singer says the track was 'force-fed down people's throats'

Life and Style
The Tinder app has around 10 million users worldwide

techThe original free dating app will remain the same, developers say

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album