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Market Report: Takeover talk sees Chemring rocket

Bosses at Chemring may need to ready the defences, if the latest rumours are on the money. The military equipment maker shot up yesterday after speculation did the rounds suggesting it could become a target, the second time it has been circled by takeover talk in a week.

A late spurt left Chemring 12.6p higher at 290.4p as market gossips claimed a number of US companies, plus one from Europe, may be considering a possible move for the defence company.

The group has been the subject of bid rumours before, but the idea has been revived recently after its share price dived last month following its admission that profits have been hit by delays to US government contracts.

This prompted UBS to add Chemring to its "M&A watch list" a week ago, with analysts from the broker arguing that its "current valuation and relatively small market cap could facilitate a takeover by a larger defence prime contractor".

The stock was trading above 700p last year, but despite this, yesterday's speculation claimed a potential bid could be priced at up to 500p a share.

A number of voices in the Square Mile were unimpressed by the rumours, and while the jump in its share price showed some were attracted by the chatter, Chemring – which trades ex-dividend today – still closed 10 per cent lower than before last month's interim results.

Encouraging manufacturing and industrial data helped the FTSE 100 jump 36.74 points to 5,664.07p, while the top-tier index was also given a boost by a decent set of results the night before from aluminium giant Alcoa, which signalled the start of the US reporting season.

There were not many blue-chip fallers, but Compass was among them after the catering giant's French rival Sodexo announced sales growth had fallen thanks to cost-cutting by corporate clients.

Shore Capital's Greg Johnson warned the update was "likely to be a negative read-through for Compass", and the analyst was proved right as it dipped 13.5p to 656p.

Chip designer Arm Holdings powered down 15.4p to 480.5p in the wake of the news that Intel is snapping up a stake in Dutch tech group ASML. This, warned Liberum Capital's Janardan Menon, could give Arm's bitter rival an advantage in their ongoing battle for supremacy.

Also behind was GlaxoSmithKline, with the drugs maker declining 42p to 1,454p after UBS took a knife to its forecasts.

The broker was much keener on BAE Systems, saying that growth from the arms dealer's UK and international operations should "offset uncertainty surrounding the US budget". With the company also being supported by recent encouraging comments from the Government over defence spending in this country, by the bell it had shifted up 8.1p to 305p.

Speculation a merger between Mitchells & Butlers and Greene King could be a possibility continued to do the rounds. M&B – whose largest shareholder is Joe Lewis, the billionaire owner of Tottenham Hotspur – ticked up 1.8p to 252.3p, while Greene King advanced by 12p to 571p after Nomura's Tim Barrett raised his target price to 585p.

Meanwhile, the revival of take-over rumours late on Monday saw Afren jump 9.5p to 114.3p yesterday – the revived speculation put forward US giant Exxon and Italy's ENI as possible bidders for the oil explorer, although this is not the first time both names have been linked to such a move.

Having lost more than 9 per cent earlier in the week after being forced to deny reports it had breached its concession agreement with the Egyptian government, Centamin was trying to make amends. However, the company's announcement that its Sukari mine had managed to produce a record amount of gold over the second-quarter only saw it bounce up 1.9p to 68.4p.

Down on Aim, Gulf Keystone Petroleum climbed 1.75p to 209p. The Kurdistan-focused oil explorer is expected to reveal an update from its Shaikan 6 well soon, and traders were optimistic over the possible contents.