Market Report: Talk of Google bid for Yell gets traders shouting

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The Independent Online

As the market donned tin hats for a second day of losses, only Yell Group had traders shouting about potential takeovers; the latest reheated bid story on a quiet week.

Rumours circulated late in the day that Google was to target the directories business. One market source heard talk of a 500p-per-share bid, which sent Yell 1.48 per cent stronger to 325.75p.

Another source said: "These rumours were doing the rounds about a year ago. Normally they would come out as idle chat on a quiet day."

The FTSE 100 zig-zagged yesterday. It opened well, rising 41 points as traders waited on the Bank of England decision on interest rates. News that the central bank had held rates sent investors into the doldrums and the index closed 50 points down at 6,222.7.

One trader said: "I'm astounded they didn't cut, and it seems a few in the market think the same. That said, the reaction is a bit overdone; everything in the market is exaggerated at the moment."

Two sectors hit were the banks, with HBOS the worst – down 4.29 per cent at 647p – and housebuilders. The latter had risen early on in anticipation of a cut, but fell immediately after the announcement. Taylor Wimpey suffered most, down 2.9 per cent to 157.1p.

The past six months have been tough for BSkyB, with the share price sliding from 713p in July, and is set to get worse, according to Dresdner Kleinwort. The broker said fourth-quarter demand had fallen a tenth, based on market research from GfK. BSkyB shares fell 9.5p to 549p.

Retailers had a respite from the recent whirlwind, dragged up by J Sainsbury, which topped the leaderboard after a third quarter update. The market might have overreacted to the positive statement as they breathed a huge sigh of relief the numbers weren't worse, said one trader. The stock closed 6.3 per cent up at 388p.

Kingfisher was among the sector risers, 3.73 per cent to 119.6p, with only Marks & Spencer the real casualty. Bearish brokers rushed to stick the boot in following the previous day's terribly received third-quarter update. It closed a further 3.42 per cent down at 395p.

Analysts were surprised that Scottish & Newcastle rose 5.5p to 724.5p despite rejecting an improved 780p per share proposal from Carlsberg and Heineken.

One analyst voiced his surprise the stock didn't fall. "Without the bid premium it is worth between 650p and 680p. Investors must believe the offer will increase."

For better or for worse, the mid-tier was dominated by trading updates and results. Top of the mid-cap pile throughout the day was Wellstream Holdings, the oil equipment group, up 10 per cent to 1255p. Wellstream said in a full-year trading update that its results "are expected to be significantly ahead of analysts' expectations".

Suddenly unpalatable was Premier Foods as it announced a trading update. The group weakened 13.15 per cent to 163.5p as it announced pro forma sales for the year were up 1.4 per cent. There were rumours that Citi had also begun a placing of 16 million shares at 167p yesterday.

Another group down on talk of a placement was Informa. The publisher retreated 6.07 per cent to 394.5p as Citi, once again, placed 8 million shares at 392p.

Investors were folding their hands in William Hill, also on a trading statement. Investec maintained its "hold" recommendation, saying it had downgraded Hill's full-year estimates for 2008. The bookie closed 7.44 per cent down at 401p.

Sports-inspired fashion retailer – think hoodies and Reebok classics – John David Group looked well fit as it sped up the small-cap leaderboard. It rose 26.07 per cent to 353p after it announced that Christmas trading had leapt 9.3 per cent over the previous year. This came as a welcome boost to investors in a very jittery sector.

The gossips were again talking up a potential bid for the property group Minerva yesterday. The news of possible interest from Songbird Estates, which owns the Canary Wharf tower, was reported by this column on Wednesday, when the rumours first emerged. It gained new legs yesterday, with the shares rising 16.75p to 157.25p.

A profit warning drove down Intimas, a designer and supplier of "ladies' intimate apparel". Investors were caught with their pants down as the group said it expects a greater loss than previously thought after a tough pre-Christmas period. It finished 11.29 per cent lower at 6.88p.

The word "beal" is a great piece of Scouse – or at least Northern – slang, which effectively means to whinge or complain. The worst small-cap performer yesterday was Beale, which had investors doing exactly that, as it issued a profit warning. The department store operator fell 26.8 per cent to 35.5p on the news.