Market Report: Rumours of Arabian knights lift Wolseley

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The Independent Online

Wolseley, the UK building supplies group, was dining out on some reheated speculation that investors from the Middle East were circling, sending it up almost 5 per cent in the morning.

The group has been the focus of gossip in the past few weeks, according to one trader, centring on potential interest from Abu Dhabi. It was also given a leg-up by a note from Exane BNP Paribas upgrading the building and construction sector. Enthusiasm waned in the afternoon, with Wolseley closing up 2.05 per cent at 1,494p.

Top of the blue chips at the end of the day was Balfour Beatty. The construction group confirmed the week's speculation that it was on the acquisition trail with the $626m acquisition of the US project management group Parsons Brinckerhoff. It will fund the deal through a rights issue, with new shares offered at 180p each. It initially admitted that it was in "advanced talks" over a "significant acquisition" – which helped Mouchel to soar as rumours sparked that it was the target, eventually closing 4 per cent up at 221p. Balfour Beatty itself raged up 7.94 per cent to 371.3p.

One sector stock was not initially buoyed with its peers. Kier fell after reporting that pre-tax profits had spiralled 41 per cent lower, which, to be fair, was in line with expectations. The group also provided some succour to investors by saying that the new year had started well, buoyed by public-sector contracts. It rallied to close up 2.57 per cent at 1277p.

British Airways had soared early on, following a Goldman Sachs note that added the airline to its "conviction buy list" as well as upping its price target. The broker believes the future may be bright for the UK flag carrier after a combination of deal activity – as it looks to seal a tie-up with Iberia and form US partnerships – cutting costs and getting to grips with its pension issues. It said the shares could lift as much as 45 per cent with "potential to exceed previous peaks". They rose 5.5 per cent to 239.9p.

Another strong performer was Tullow Oil, up again after climbing strongly the previous day. It soared after announcing the find of a "significant" oil column in the Ngassa-2 well in Uganda, which had been heavily rumoured since the start of the week. There will be profits, thought the investors, as the shares rose 4.89 per cent to 1245p, and the brokers were feeling similarly giddy. Panmure, Nomura and UBS all queued up to support the stock.

The FTSE 100 hit another year high, closing up 0.75 per cent at 5,162.6 points, but market experts were unsure whether the good times could hold. Alistair McCaig, head of investment management at the spread betting firm Worldspreads, said: "No one is brave enough to stand in front of the train at the moment, but there is a bit of nervousness that the market has been overbought. While the momentum is positive, a few days of selling and a lot of people will jump aboard and take profits."

The miners were mixed yesterday, finding little direction. Antofagasta was the pick after support from Cazenove. The blue-blooded broker upgraded the stock to "outperform" from "in line", backing it to be in the perfect position with copper prices set to rise.

Many of its peers were among the worst performers on the index with Lonmin at the foot, down 2.62 per cent at 1,783p as profit-takers piled in. The previous day's commodity price rises were forgotten, as was the residual chat of its potential takeover.

The technology giant Oracle announced worse-than-expected sales yesterday, which hit rivals across Europe. Autonomy, which specialises in compliance systems, short-circuited as well. It rebounded in the afternoon, closing up 1.32 per cent at 1,530p.

On the second line, the London Stock Exchange was still basking in the glow of chat that German rival Deutsche Börse was once more preparing a run at it. The rumours saw the shares up further, closing 2 per cent higher despite Bank of America pouring cold water on the deal. The broker said such a move was unlikely for the Börse especially as it would be tough to secure politically. So almost five years after the original bid, which cost the German group boss his job, why are the rumours resurfacing now?

On the downside it was the wrongmove for shares in Rightmove as a cut from Canaccord Adams sent it spinning down 1.86 per cent to 579p. The broker downgraded its recommendation from "buy" to "hold", saying the value of the shares would remain at a similar level for the rest of the year.

In the wider market, Centaur Media enjoyed a strong rally despite posting a 77 per cent fall in pre-tax profits to £4.4m. The group rose 11 per cent to 45p as it noted stabilisation in the market.

At the other end was poor old French Connection, whose shares fell more than a tenth in value to 50p after bosses revealed that first-half losses had more than doubled to £12.8m. The board is reviewing all its businesses, preparing to cut underperforming stores and sack staff. Fcuk indeed.

On Aim, African Minerals, run by the colourful Frank Timis, said it was in talks with a number of companies over a takeover, including ENRC, which confirmed talks with another African miner, Camec. ENRC noted the announcement, but nothing more – despite insistence from Mr Timis that it has carried out due diligence for three months. Its shares soared 11.7 per cent to 382p.