Market Report: Return of Qatar bid rumours boost Centrica

Not for the first time, market gossips had Centrica in their sights last night as the owner of British Gas powered up following the re-emergence of speculation that it could be about to receive an offer.

A potential bid from Qatar was once again the focus of the chatter, with one vague tale suggesting the state-owned Qatargas may team up with Iberdrola for a joint attempt. The Spanish utility – another name often linked to Centrica – has recently had dealings with Qatar, having agreed in March to sell a 6.16 per cent stake to Qatar Holdings, a division of the country's sovereign-wealth fund.

With a potential price being discussed of between 450p and 480p a share, Centrica initially surged as high as 316.3p. However, with traders dismissive of the rumours, by the end of the session it had tracked back to 311.7p, an overall rise of 3p. As a result, it remained lower than at the start of the week, having dropped by nearly 4 per cent on Monday after its interim management statement.

The utility was not the only group returning to the bid spotlight, with reheated gossip that AstraZeneca – up by 2.5p to 3,142.5p – could be interested in Shire, pushing the drugs group forward 43p to 1,922p, an all-time high.

Meanwhile, the continued presence of takeover speculation, which re-emerged earlier in the week, helped Burberry to end up in the gold-medal position, as it was lifted 36p to 1,365p. Market voices also pointed to strong sales figures from its French peer, Hermès, as helping, while Credit Suisse expressed its support for the luxury sector.

On the FTSE 250, Cable & Wireless Worldwide was another subject of vague chatter, as persistent whispers of a possible bid – with AT&T once again mentioned – left the telecoms group 1.2p higher at 51.9p.

Overall, the FTSE 100 slipped back 42.89 points to 5,976 as the Bank of England cut its growth expectations for the year to 1.75 per cent from 2 per cent. A number of weak miners contributed to the top-tier index's fall, including Fresnillo which dipped by 60p to 1,411p.

The wooden spoon was taken by ITV, pegged back 4p to 71.9p by the broadcaster predicting it would report year-on-year falls in advertising sales in both May and June.

Prudential was another group releasing figures, and the bank retreated 5p to 765p despite its new business profit for the first quarter beating expectations. Both Lloyds Banking Group and Royal Bank of Scotland were also in the red, moving down 0.04p to 54.54p and 0.14p to 42.42p respectively, while HSBC eased back 10.1p to 646.1p after its chief executive Stuart Gulliver revealed his new direction for the company. Reed Elsevier advanced 10p to 559.5p on the read-across from the Dutch group Wolters Kluwer, which said it was seeing improvements in both the UK and European markets. Reed also benefited from a positive reaction to its investors day earlier in the week, with UBS praising a "confident presentation" on its risk-solutions division as the broker reiterated its "buy" recommendation.

Arm Holdings edged forwards 4.5p to 597.5p after Morgan Stanley examined recent reports that Apple could use the Cambridge-based group's technology in some of its products, replacing Intel. Although the broker's analysts said they "draw no conclusions, given [the] lack of confirmation", they did add there were "several elements that suggest such a change is possible" and kept their "overweight" stance on the chip maker.

Bargain hunters helped Pace to bounce up 5p to 98p on the mid-tier index after it plummeted by nearly 40 per cent on Tuesday following a profit warning. Investors may have given the set-top box manufacturer's share price some respite, but the analysts were nowhere near as generous with JP Morgan Cazenove and Royal Bank of Scotland among those cutting its price target.

Altium's Arun George did the same, and although he said the "prospect of a bid is now the key rallying call for the bulls", he added that "in the context of a management team low on credibility and a track record of poor City communication, we believe the current rating is appropriate".

Elsewhere, Bwin.party enjoyed a rise of 2p to 151p following the European Commission's decision on Tuesday to approve online gambling legislation proposed by the German state Schleswig-Holstein. Evolution Securities' James Hollins said it was "welcome news for the key German operators", but – noting that proposed strict legislation could come in across the country next year – the analyst kept his "neutral" advice on the group.

A profit warning from RAB Capital, coupled with an admission that it is considering delisting after the departure of a significant number of clients, meant the hedge fund plummeted by nearly 25 per cent on the Alternative Investment Market, sliding by 2.5p to 7.75p.

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