Market Report: Takeover talk drives up Stagecoach shares

The rumour mill cranked into action yesterday, driving Stagecoach up the mid-tier index after speculation swirled that it could be in line for a potential bid.

As the transport group pushed forwards 11.1p to 228.8p, market gossips were mulling over vague rumours that it could receive an offer, with Deutsche Bahn and an unnamed group from Hong Kong both being linked and a price mentioned of 350p-a-share.

However, sceptics played down the idea. "Ultimately nothing happens without the say-so of Stagecoach's CEO Brian Souter and co-founder Ann Gloag," said Arbuthnot Securities' Gerald Khoo. "Between them, they own about 26 per cent of the company... and I do not think Mr Souter is in the mood for retirement."

In addition, the analyst said, given the fact that Deutsche Bahn owns Arriva, the issue of market share in the UK bus sector is "a complete show-stopper" in terms of the German rail group making an approach.

Stagecoach also benefited yesterday from positive comments from Liberum Capital, which issued a "buy" note and said it believes "there is an increasing likelihood that [the group] will return capital to shareholders".

Overall the FTSE 100 fell to its lowest for two weeks, finishing 46.64 points behind at 5,963.8.

Growing fears that the release of China's inflation figures on Friday will show a large increase, meant the miners were under pressure, with Antofagasta, Kazakhmys and ENRC dropping 51p to 1,355p, 41p to 1,368p and 21.5p to 909p respectively.

Xstrata edged back 1p to 1,467.5 as the commodity trader Glencore finally confirmed the details of its initial public offering, scheduled for next month. There has been persistent speculation that the move will be the first step towards a merger between the two.

InterContinental Hotels was lifted 7p to 1,288p after Morgan Stanley reiterated its "overweight" rating and raised the group's target price to 1,650p from 1,500p. The broker was generally upbeat on the sector, saying that "with robust corporate demand and low new supply, we are in the middle of a strong hotel cycle", prompting Whitbread to add 12p to 1,685p while Millennium & Copthorne was bumped up 7p to 540p.

Unilever was also among the risers, as sentiment around the consumer goods giant was given a boost by results from across the Channel. The group, whose diverse portfolio of brands stretches from Ben & Jerry's to Vaseline, climbed 14p to 1,942p after its French peer Danone shrugged off fears over the economic climate to reveal an impressive growth in sales.

However, Evolution Securities' Warren Ackerman warned that the read-across between the two was "fairly limited", saying that he did not expect Unilever to be as positive on pricing as its peer.

Market voices pointed to Unilever's announcement earlier this week that it is closing its final salary pension scheme as another driver behind its shares, and said investors were also switching from Reckitt Benckiser.

The owner of Cillit Bang was at the foot of the top-tier index after it was knocked back 251p to 3,115p following the surprise revelation that its chief executive is retiring. Bart Becht has led Reckitt since 1999, but Guardian Stockbroker's Atif Latif said the sell-off was "overdone" and described his replacement Rakesh Kapoor as an "able candidate".

There was also upheaval at the top of Debenhams, but the announced retirement of its chief executive, Rob Templeman, did not have the same effect, with the department store edging down 0.25p to 66.55p. The news came with its half-year results, in which the group's underlying pre-tax profit just beat expectations and it revealed it was restarting its dividend.

Debenhams was one of many companies on the FTSE 250 updating the market yesterday, including its fellow retailer WH Smith which powered up 24.4p to 475.1p after posting a rise in profits of 3 per cent.

Filtrona was also near the top, advancing 14.8p to 322p, with the plastics and fibre group's first-quarter revenue enjoying a jump of nearly 10 per cent. However there was no such joy for PZ Cussons, 13.3p behind at 328p, after it warned of a number of near-term headwinds including rising raw material costs.

There was a surge of 11.75p to 166.5p for Gulf Keystone Petroleum on the Alternative Investment Market as the oil explorer increased its estimates for its Shaikan block in Kurdistan to 4.9 billion barrels.

Meanwhile, the small-cap care home group Southern Cross shot up 1.81p to 11.75p after issuing a brief statement that it had met with its major landlords over its financial problems. Although it said no decisions have yet been made, the troubled company added that there was "a general recognition of the value to all parties of moving forward to a solution in an orderly fashion".