Market Report: Takeover talk lifts Biffa above the stock carnage

It was a massacre on the markets yesterday, as fears the US was plunging headlong into a recession sent London down more than 5 per cent. There were few rumours doing the rounds as most traders performed the "duck and cover" manoeuvre, but talk emerged of a takeover battle erupting for Biffa.

The waste management group survived the bloodletting, rising 9.25p to 341p, on rumours that a consortium fronted by General Electric was to wade in with a 375p per share bid.

Biffa had opened its books to Montagu Private Equity and HG Pooled Management in December after the consortium offered 350p per share, but traders were chatting excitedly about a prospective higher bid.

It was a day that the bears took charge, and the FTSE 100 got a mauling. The top tier plunged to its lowest point since June 2006, with its worst single day of falls since 11 September 2001. The index closed down 323.5 points to 5578.2.

The mining majors had an especially bad day. BHP Billiton and Rio Tinto both slumped more than 10 per cent as a firm bid from BHP, much rumoured on Friday, failed to emerge. There are still two weeks before the "put up or shut up" deadline imposed by the UK Takeover Panel, but investors are getting restless. The stock fell 5.21 per cent to 4455p.

The top tier fallers were littered with casualties from that sector as fears of weakening demand hit metals prices, and investors tried to lock in some profits.

In mid-morning, Xstrata had been top of the leaderboard, as rumours of a bid from Vale intensified. It stormed up almost 5 per cent, until its rival put out a statement. The Brazilian group said it was in talks with Xstrata but there was no "material result yet".

It slumped to close the day 184p down at 3179p.

The building and plumbing supplies group Wolseley, sprung a leak after it announced a profit warning. Pre-tax profit fell almost a third, hit by the worsening US housing market. The group added it "expects business conditions in a number of [its] markets to become more challenging over the next few months". The stock fell 3.7 per cent to 689.5p.

During the early morning sell-off, only one stock made it into positive territory. Scottish & Newcastle clawed its way into the black, following last week's decision to open negotiations over a potential £7.8bn deal with Carlsberg and Heineken. It didn't hold, and clsoed 9.5p down at 756p.

In the end, four stocks closed up, headed by Friends Provident. The insurer rose 2.3 per cent to 156p on reports of a potential bid from Northern Rock suitor JC Flowers. The private equity group has taken a 2 per cent stake in the insurer, and there was talk it could launch a £4bn bid.

On the second tier, a bout of profit-taking smashed Autonomy, knocking it to the worst performer on its index. The software group fell 13.81 per cent to 830p.

Elsewhere, the retreating oil price battered related sector stocks. The exploration and production company Venture Production was the worst, down 11.93 per cent to 601.5p. Wood Group, which is in oil equipment and services, fell 8.37 per cent to 334p.

The pub chain JD Wetherspoon slid 7.95 per cent to 292.5p in anticipation of its trading update today. The group is set to release its numbers for the Christmas period. Some investors were not feeling confident yesterday after less than stunning announcements from Punch Taverns and Enterprise Inns.

Surprise soaraway success on the mid caps was Northern Rock. The shares stormed up 46.12 per cent to 94.25p as the Government unveiled its plan to salvage the troubled lender in the morning.

The market was also talking up Close Brothers after reports that the takeover by a consortium comprising Cenkos Securities and Landsbanki was close to completion. The broker rose 14.5p, but retreated with the market, closing down 16.5p at 927p.

Trading updates smashed several stocks in the wider market. The worst performer on AIM was Humberts, which warned it expected a loss in the first half of the year after disappointing trading in its residential agency business. It also announced the surprise resignation of its chief executive and executive chairman. The stock gave up 42.45 per cent on the news, to close at 15.25p.

Suffering a similar fate was Hatpin, which lost 41.77 per cent to 46p. The human resources group said it would miss full-year profits expectations by 25 per cent because of a poor performance at its subsidiary The Talent Business.

At the other end the fabric supplier Fiberweb rose almost a quarter to 46p after it was approached by rival Avgol over a possible takeover. Avgol, which is listed on the Tel Aviv Stock Exchange, has offered 100p per share and a 2.5p dividend.

Mama Group, the music and marketing company, rose 18.42 per cent to 5.6p after it turned a profit for the full year.