Market Report: Traders bank on talk of HSBC bid for UBS

The banking sector was brimming with bid speculation yesterday.

Mid-afternoon murmurs suggested that HSBC, the London-based global banking giant, was mulling a bid for UBS, its Swiss counterpart which has suffered in the prevailing market turmoil.

One trader, who prefaced his comments with a note of caution about the spurious nature of most M&A speculation which surfaces on a Friday, said that while the talk was new and some what unexpected, considering the size of HSBC and the problems at UBS, it was not entirely without merit.

Nick Brown, from Evolution Securities, made a similar point. "It's an interesting point," he said, "HSBC should unquestionably be one of the best in the investment banking businesses, and they may be looking to UBS to do just that. As I said, it's an interesting proposition."

The other rumour, floated in the morning but soon dismissed, suggested that Barclays was mulling a bid for Société Générale, the French bank which employed Jérôme Kerviel, the minor trader alleged to have incurred major losses via a series of unauthorised transactions.

The chatter failed to sway traders, many of whom questioned the UK bank's ability to raise money for such a move. "It must be Friday," said one trader, reflecting the incredulity of the market.

HSBC shares closed down 8.50p at 758.50p. Barclays was also down, by 1.50p to 425.50p.

Overall, the FTSE 100 remained mired in a depressed stupor, shedding 66.5 points to 5,699.9.

Fears of a US recession intensified following the publication of worse than expected non-farm payroll figures, which revealed that American employers cut jobs by 63,000, the most since March 2003 and well behind market expectations of an increase of around 20,000.

It could have been worse – the London benchmark was saved from a sharper tumble after the US Federal Reserve announced fresh measures to mitigate the problems in the financial system. The FTSE 250 was also down, by 137.1 to 9,853.7.

Concern for the American economy weighed down on the mining sector, which registered some large losses yesterday. BHP Billiton was the worst off, losing 5.36 per cent, or 90p, to 1,590p.

Others in the sector, including Antofagasta, which lost 5.24 per cent, or 43.5p, to 786.5p; Vedanta Resources, which lost 4.69 per cent, or 111p, to 2,256p; Anglo American, which lost 4.1 per cent, or 141p, to 3,300p, and Rio Tinto, which lost 3.67 per cent, or 213p, to 5,594p, were also depressed by the day's news.

Elsewhere in the market, bargain hunters returned to a number of stocks which have suffered in recent days.

The shift in sentiment took HBOS, which climbed by 2.46 per cent, or 14p, to 582.50p, to the top end of the FTSE 100 leader board. British Airways, which was hit by some negative vibes on Thursday, also rallied, by 3.47 per cent, or 8.50p, to 252.50p, to second place on the leader board.

Yell was down 5p to 195p after UBS, which cited "risks of a perfect storm", reiterated its "sell" rating for the company's stock.

The UBS analyst Ian Whittaker said: "We fear cyclical issues could exacerbate structural problems, ie. economic pressures force advertisers to re-evaluate advertising spend in directories, and the spend does not return even if conditions improve."

On the FTSE 250, bid speculation surrounded Burberry, which, it was suggested, was likely to be subject to an offer soon. The talk was thin on the ground, bearing little detail about the likely price or the identity of the prospective suitor.

The company's shares climbed nonetheless, closing up 6.81 per cent, or 27.25p, claming second place on the FTSE 250 leaderboard.

EasyJet also had a good day. The low-cost airline saw its share price rise by 6.75p to 416.50p after revealing a 22 per cent rise in passenger numbers in February. The figures heartened investors, who were reassured by the positive effect of GB Airways, the British Airways franchisee easyJet acquired for £103m. The company's load factor – that is, the proportion of occupied seats in an aeroplane – was also up, by 1.4 per cent to 84.3 per cent.

On AIM, the bidding war for Imprint, the specialist recruitment company, turned a page yesterday. The company withdrew its recommendation for Hydrogen's offer, leaving some in the market with the feeling that Dublin-based peer Premier, which has also expressed an interest in Imprint, was likely to take the company.

In other news, RAB Capital is reported to have increased its stake in Imprint to 9.27 per cent via contracts for difference.

Imprint shares were down 0.50p to 111.25p, while RAB Capital's were down 3p to 55.50p. Hydrogen stock closed flat at 222.50p.