Market Report: Takeover talk swirls around Arm Holdings

With the top-tier index bouncing last night after plummeting nearly 6 per cent over the previous three sessions, an old favourite made a return as market gossips suggested once again that Arm Holdings may be in line for an approach from the US.

The chip designer is a regular subject of bid chatter, and yesterday vague rumours reemerged claiming both Oracle and Intel could be mulling over an approach, with a possible price mentioned of 750p a share.

That would represent a large premium to its current share price, but it would be less of a difference than the 2,550p a share the US technology giant Hewlett Packard agreed to pay for Autonomy, with that deal prompting analysts last week to reexamine Arm's takeover potential.

There was even speculation the possible price for Arm could go higher, thanks to a suggestion that Apple, which uses the group's technology, may wish to get involved if others make a move. However, traders refused to give much weight to the chatter-chatter, and neither did investors as Arm edged forwards a mere 2p to 492p.

Those hoping for other technology stocks to follow Autonomy – which advanced 34p to 2,486p – in being snapped up received a blow as Micro Focus announced discussions over a possible takeover of the software group had ended. There had been plenty of talk that such a result was likely, but it dropped 9p to 254p on the mid-tier index nonetheless, although Northland Capital Partners' David Johnson said he still believed the "cash flows associated with the business means that it remains a target for private equity".

After dropping more than 300 points over three straight days, the FTSE 100 managed to power up 54.54 points to 5,095.3 as the prospect of the Libyan conflict coming to an end boosted a number of the oil companies. Both Royal Dutch Shell and BP operated in the country before civil war broke out, although despite the former rising 35.5p to 1,919p, the latter only ended up 0.3p ahead at 390.2p.

Meanwhile, Petrofac shot forwards 43p to 1,211p, thanks in part to speculation a conclusion to the fighting could provide the oil services group with numerous opportunities, while its interim results also beat expectations.

Another updating the market was Essar Energy, but the power company slipped 9.8p to 247.9p despite announcing an 80 per cent jump in its first-half pre-tax profits after it admitted problems with getting regulatory approval meant a number of its projects were facing delays.

There was no respite for the banks, as they once again finished among the major fallers. Royal Bank of Scotland took the wooden spoon, losing 1.1p to 19.67p, and Lloyds Banking Group and Barclays retreated 0.82p to 27.56p and 4.25p to 146.25p respectively.

As well as the long standing concerns over the eurozone debt crisis and ring-fencing proposals, the sector was also knocked by Deutsche Bank cutting its rating to "neutral", with the broker noting recent measures such as the ECB buying bonds have failed to stop the banks underperforming. Meanwhile, some in the City were suggesting the short-selling ban on financial stocks in Italy, France, Spain and Belgium may mean investors are shorting the UK banks instead.

Also among the stragglers was Burberry, which eased back 15p to 1,191p after a bearish note on the luxury retailers by Bank of America Merrill Lynch on the potential consequences of double dip recession.

The market may generally have been on the move up, but that did not stop gold prices climbing yet again as the yellow metal continued to set new highs, with it even coming close to breaking the $1,900 an ounce level.

Citigroup raised its gold prices forecasts for next year from $1,325 to $1,650 an ounce, citing a number of factors including S&P's recent downgrade of the US debt rating and the sovereign debt situation in Europe. The broker also said Randgold Resources – 260p stronger at 6,870p – remained its favourite among the gold producers while it changed the rating of Petropavlovsk to "buy", as the mid-tier miner put on 45.5p to 779p.

Elsewhere on the FTSE 250, Invensys jumped 9.5p to 231.2p in the wake of reports the engineer – often the subject of takeover talk – could attract an offer from Siemens. Also ahead was IG Group, with the spreadbetter lifted 15.8p to 409.4p after raising its revenue forecast.

Meanwhile, Greggs eased forwards 3.1p to 475.9p as investors did not seem particularly convinced by Espirito Santo's claim that the high street baker was not facing an "immediate threat" from the recent expansion of its competitor Poundbakery.

Down on the Alternative Investment Market, the mobile software group Parseq soared up 29.73 per cent, or 1.38p, to 6p after announcing an approach had been received from a "potential offeror" headed up by its chief executive Rami Cassis.

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