Market Report: Sage expected to rise thanks to Autonomy deal

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The Independent Online

As the top-tier index's rally was brought to a shuddering halt last night, Sage managed to finish ahead thanks to talk that investors flush with cash after recent takeover activity in the sector will turn to the software group next.

The technology company – a favourite of market gossips – ended up as one of just eight blue-chip winners, edging forwards 0.1p to 255.5p in the wake of Panmure Gordon's George O'Connor reiterating his "buy" advice. The analyst suggested Sage would benefit from Hewlett-Packard's £7bn acquisition of Autonomy, revealed last month, pointing out that "the... payback [from the deal] will need a home".

Although Mr O'Connor pointed out that "investors in Sage and Autonomy had traditionally come from different 'camps'", he said this was changing with the gap "being eroded by Sage's new growth initiatives" and called its UK launch of a new cloud computing product "a watershed moment".

Long before the takeover of Autonomy, which yesterday stayed steady at 2,525p, Sage has been seen as a potential bid target. With IBM, SAP and Oracle among the numerous companies talked about as possible predators, Mr O'Connor did little to play this down, predicting the company would still be "mooted as a take-over candidate... by one of the industry behemoths."

After gaining nearly 300 points over the previous three days, the FTSE 100 fell behind in early trading ahead of the key non-farm payrolls report from the US. When it came out showing no net new jobs had been added last month, it dropped even further and at the bell the benchmark index was 2.34 per cent, or 126.62 points, lower at 5,292.03.

However, some in the City were seeing the silver lining, suggesting that the disappointing data could increase the chances of a third round of quantitative easing being introduced by the US Federal Reserve.

Given they had led the rally earlier in the week, it was not much of a surprise that the banks were among the major losers. Lloyds Banking Group and Royal Bank of Scotland were knocked back 2.55p to 33.12p and 1.41p to 24.84p respectively, while Barclays – down 15.15p to 165.2p – was left with the wooden spoon.

BP slumped 14.1p to 374.4p after the US oilfield services provider Halliburton said it was suing the energy giant over the Gulf of Mexico oil spill. There were also concerns of yet more trouble in the area, with BP and Royal Dutch Shell (down 38.5p to 2,036.5p) both having evacuated workers from operations in the Gulf in the past few days over fears of a potential storm.

Elsewhere, AstraZeneca was driven back 106.5p to 2,809.5p in response to its cholesterol product Crestor failing to show a significant improvement compared to Pfizer's Lipitor as the two rival drugs went head-to-head in a clinical study. Matrix's Navid Malik said the results were "likely to lead to downgrades" to sales forecasts, as the analyst kept his "reduce" rating.

Down on the FTSE 250, the retailers were suffering as the sector prepared for a rush of results next week. Home Retail, which is releasing its second-quarter trading statement on Thursday, had its target price cut to 130p by UBS's Andrew Hughes and was pegged back 8.8p to 124.3p

Meanwhile, SuperGroup – which is also updating the market next week – brought a run of four winning consecutive sessions to an end, retreating 15.5p to 994.5p.

The blue-chip supermarkets were under similar pressure, after Citigroup said there was "no reason to own the... sector over the coming months". Both Wm Morrison (down 4.8p to 297.4p) and J Sainsbury (down 4.8p to 297.4p) had their ratings cut, to "hold" and "sell" respectively, while Tesco (down 5.85p to 375.05p) had its "sell" recommendation reiterated.

Those eager for a deal among the energy groups were being pointed by City scribblers to Premier Oil, as analysts from Goldman Sachs upgraded their rating on the explorer to "neutral" in response to it losing over a third of its share price since April. Saying the potential upside was "sufficient in our view for speculation on [merger & acquisition activity] to resume", it was not enough to stop Premier slipping 8.1p to 329p.

Its peer Salamander Energy was even worse off, however, as it was knocked back 9.1p to 214.9p. After the oil and gas group announced on Thursday it was plugging and abandoning a well off the shore of Vietnam, investors failed to be placated by its announcement it had agreed a disposal of a number of mature assets to the Singapore group Risco Energy.

The "Arab Spring" was being blamed by Cyril Sweett for the scrapping of a number of its projects in the Middle East, as the construction consultant issued a profits warning. The group said its full-year results were set to miss expectations, citing the fact that "subdued" trading had carried on into the second quarter of the year, as it plummeted 5.5p to 28.5p on the Alternative Investment Market.

FTSE 100 Risers

Randgold Resources 6,670p (up 275p, 4.3 per cent)

Gold miner is only serious blue-chip riser as yellow metal prices shoot ahead.

Tullow Oil 1,112p (up 3p, 0.27 per cent)

Energy explorer advances in the wake of bid speculation re-emerging on Thursday.

Imperial Tobacco 2,092p (up 3p, 0.14 per cent)

Cigarette manufacturer in demand after investors search for defensive stocks.

FTSE 100 Fallers

Weir 1,850p (down 116p, 5.9 per cent)

Engineer knocked back after rising over 14 per cent in last five days.

Aviva 325.1p (down 14.8p, 4.35 per cent)

Insurer on the slide as Collins Stewart reduces its price target to 430p from 505p.

ITV 57.25p (down 2.45p, 4.1 per cent)

Broadcaster continues to fall in the wake of being downgraded by Nomura to "neutral" on Thursday.

FTSE 250 Risers

ITE Group 184.8p (up 14.7p, 8.64 per cent)

Exhibition organiser jumps after Investec upgrades its recommendation to "buy" from "hold".

Hansteen Holdings 79.5p (up 2.35p, 3.05 per cent)

Property investor manages a small bounce in the wake of losing 5.5 per cent in last two days.

Unite 186.8p (up 2.5p, 1.36 per cent)

Student landlord's latest advance means it has added over 22 per cent in just seven sessions.

FTSE 250 Fallers

Hays 76.05p (down 4.5p, 5.59 per cent)

Recruiter knocked back after strong response to its final results on Thursday.

Dixons Retail 11.97p (down 0.34p, 2.76 per cent)

Electronics retailer slides ahead of the release of its preliminary results on Wednesday.

Bunzl 791p (down 21.5p, 2.65 per cent)

Distributor falls as JP Morgan reduces its rating to "neutral" from "overweight".