Market Report: Speculators help to construct a rise in Ennstone

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The Independent Online

Ennstone, the FTSE Smallcap-listed provider of building and construction products and services, surged as much as 15 per cent on the back of some early bid talk yesterday.

Speculators suggested that a larger peer was set to mount a 42p-per-share bid for the company.

One trader suggested that an offer was likely soon, identifying Lafarge as the potential bidder, while others, citing reports that the Ennstone chairman, Vaughan McLeod, had denied receiving an approach, said that a firm offer was unlikely to materialise soon.

The early-morning chatter was one of the few features in an otherwise quiet and depressed market, and lifted Ennstone's share price to an intra-day high of 33.75p. By the close, the stock had settled at 30.75p, up 1.5p, or 5.13 per cent.

The FTSE 100 index returned to its recent, bearish, form, closing 87.1 points, or 1.5 per cent, lower at 5,766.4.

The London benchmark was weak as the Bank of England decided to keep interest rates on hold at 5.25 per cent. Nearer to the close, the index was further depressed by Wall Street, which was under pressure from declining financial stocks.

Sentiment was hit by a slide in Merrill Lynch's share price – which slid to a four-and-a-half year low after the company said it would stop funding loans at its First Franklin business – and by news of problems at Thornburg Mortgage, which disclosed that its failure to meet a margin call had caused a series of cross-defaults.

The FTSE 250 was also down 1.5 per cent, losing 153.4 points to 9,990.8.

On the FTSE 250, the paper, packaging and office products specialist DS Smith won a place on the leader board after attracting some positive broker sentiment. Citing recent weakness (the stock has lost 33 per cent over the past three months, underperforming the index by 7 per cent), analysts at UBS upgraded the stock to "buy" from "neutral", taking DS Smith up by 2.25p, or 1.41 per cent, to 161.75p.

John Wood also benefited from positive coverage. Goldman Sachs raised its target price for the stock to 400p from 390p, helping it climb by 3.5p to 424.25p.

Meanwhile, New Star Asset Management shed 8.25p to 87.50p after being downgraded to "sell" from "buy" at Deutsche Bank, which said it was adopting a cautious view on the UK asset management sector. Deutsche added: "Negative operational gearing is a significant short-term risk for mainstream asset manages as revenue attrition ... exceed[s] short-term cost flexibility."

On the FTSE small cap index, Cineworld soared by 15p, or more than 12 per cent, to 137p after ITV confirmed that its Carlton Screen Advertising unit had agreed to sell certain assets to Digital Cinema media, a new cinema advertising joint venture between Cineworld and Odeon Cinemas.

Robert Wiseman Dairies climbed 19p, or 3.91 per cent, to 505p, after buying back 17,500 of its own shares at a price of 484.3714p.

Hogg Robinson, the business support services company, was also up, gaining 3p, or 5.08 per cent, to 62p following speculation about some stake-building by an unnamed peer.

On AIM, Gulf Keystone Petroleum was up following rumours that the energy giant Royal Dutch Shell was set to snap up part of its operations in Algeria. The speculation, which remained unconfirmed, suggested that the two companies were close to announcing a deal. The talk lifted the company's shares 1.5p to 32p.

The independent oil and gas company Afren also had a good day after acquiring Devon Energy's interest in the Cote d'Ivoire.

The $204m (£102m) debt-financed deal includes Devon's 48 per cent stake in the oil and gas production block CI-11, up to an 80 per cent interest in the undeveloped block CI-01 and complete control over the onshore Lion gas plant from 30 June 2008.

News of the deal, which will boost Afren's reserve base by 67 per cent to 70 million barrels of oil equivalent, lifted the company's stock 7p, or 5.5 per cent, to 134.5p.

The recruitment specialist Imprint lost 2p, or 1.76 per cent, to 111.75p after news that RAB capital, the UK hedge fund which held about 8 per cent of the stock in the now-nationalised Northern Rock, had taken a 7.51 per cent interest in it, via a contract for difference.

Imprint is currently caught in a bidding war between Premier, its Dublin-based peer, and Hydrogen, another recruitment specialist, whose offer is backed by the company's board. RAB Capital's shares were down 0.75p to 58.50p.

And finally, LonZim was up 1p to 101p after acquiring the final 20 per cent holding in Blueberry International Services, eight months ahead of schedule. LonZim acquired 80 per cent of Blueberry in January.