Market report: Takeover talk ratchets up shares and excitement

There is nothing like bid talk to get the Square Mile excited,
and there was plenty to whet the appetite yesterday. The news that
Vodafone is eyeing up Cable & Wireless Worldwide was not the
only prospective deal on investors' minds amid claims that
companies are eager to start splashing the cash.

Takeover activity may hardly have been booming recently, but Credit Suisse believes the worst appears to be over. Citing a survey in which over half the companies questioned said mergers and acquisitions were their "prime focus" in terms of corporate actions, the broker said there was "an ongoing appetite" for deals and picked out a number of possible bid targets.

One of them was Old Mutual, and the financial conglomerate was pushed up 4.5p to 127.6p with it also lifted by break-up talk. UBS analyst Michael Christelis claimed the recent sale of its Nordic operations "positions the business for further consolidation and simplification", adding that a full break-up between its developed and emerging-market operations could give its share price a major boost.

Credit Suisse also picked out RSA Insurance, another frequent subject of takeover speculation. The insurer was bumped up 2p to 112.2p as Exane BNP Paribas' Andy Hughes highlighted a number of positive recent updates from its peers, while the financial stocks were rallying generally after Greece passed austerity measures late on Sunday.

The miners' takeover potential was also in focus, with the spotlight on BHP Billiton as a possible aggressor. After its boss Marius Kloppers said over the weekend the digger planned to make further acquisitions, market gossips were reviving vague speculation BHP may be considering a potential move for either Anglo American or US coal producer Walter Energy.

With the rumours suggesting a possible bid could be priced at 3,800p, the former jumped up 70.5p to 2,817p, although Mr Kloppers had refused to comment on whether Anglo could be a target while traders were unimpressed by the chatter.

Vague takeover speculation was being revived around ENRC as it moved 17.5p higher to 702p despite some City voices believing its bid potential has significantly diminished in the wake of the decision by Glencore (down 5.95p to 429.25p) and Xstrata (up 15p to 1,213p) to merge. Meanwhile, the latter was helped by hopes that calls for the pair's deal to be changed to value Xstrata higher may be successful.

Finally, bid rumours continued to strengthen around Kenmare Resources, which has been the subject of talk recently that it could be a target for Rio Tinto (73.5p higher at 3,845.5p). The Irish digger shot up another 5.4p to 58.5p on the FTSE 250 amid vague speculation an approach could be imminent, meaning it has added over 18 per cent in just four sessions. That was nothing compared with CWW, however, which surged 44.54 per cent to 28.54p on Vodafone's admission of interest while the telecoms giant closed 1.75p better off at 174.4p.

While the weekend's events in Greece were enough to push the FTSE 100 to a six-and-a-half-month high, it again failed to move much past the 5,900 point level, finishing 53.31 points ahead at 5,905.7.

Morrisons could only climb 0.3p to 291p after coming under attack as Oriel Securities pointed out that while the ban on cigarette displays in supermarkets is less than two months away, it will be another three years until smaller stores have to follow suit. Saying as a result there could be a shift of as much as £1bn in sales to convenience shops, Oriel's analysts reiterated Morrisons' reduce rating and criticised the fact that, unlike its rivals, the group's move into this area has been rather limited.

On the mid-tier index, Henderson ticked up 4.5p to 127.6p as Credit Suisse upgraded the Anglo-Australian fund manager's rating to buy. Meanwhile, SuperGroup was left with the wooden spoon after sinking 28.5p to 528p, falling for the fourth straight day following its disappointing third-quarter figures last week.

It was a mixed session for the AIM-listed energy groups, with Faroe Petroleum sliding 5p to 165p following the admission it was plugging and abandoning its Kalvklumpen well in the Norwegian North Sea.

Sound Oil was even worse off, as it was smacked back 15 per cent to 1.34p on the news that the Cataka-1 exploration well, in which Sound has a 20 per cent interest, is to be abandoned thanks to drilling difficulties.

In contrast, Gulf Keystone Petroleum continued its steady march forwards, despite Seymour Pierce's Dougie Youngson saying the recent bid rumours were "premature". Still, the analyst did add that the speculation was "likely to be accurate in the longer term" while initiating coverage with a buy rating, and the explorer spurted up 14.25p to 397p.