Market Report: Trinity Mirror rises on 'Times of India' bid talk

Possible bid interest from Bennett, Coleman & Co, the media group behind The Times of India newspaper, drew investors into Trinity Mirror yesterday.

Market sources cited rumours that the Indian group, which acquired Virgin Radio in a £53m deal in June, had approached some large Trinity shareholders with a proposal to pick up their stakes before launching a formal offer for the Daily Mirror and Sunday Mirror publisher.

"Trinity is cheap following the concern about its pension fund and the debt on its balance sheet," said one analyst who did want to be identified.

"Any bidder would have to think hard about it, especially with the pension fund liabilities in the frame. But remember that Usaha Tegas moved in to Johnston Press when there was so much concern in the market, so we may see the same thing with Trinity Mirror. Remember that the market tends to overreact sometimes."

The stock climbed to a high of 94.25p, up more than 6 per cent, in late-afternoon trade as the rumours began to circulate. By the close, it had eased back to 92.25p, up 3.94 per cent or 3.5p. Johnston Press was up 0.75p at 52.5p.

Among the banks, HBOS gave back some gains, down 3.5p at 301.5p, as brokers took stock of the sector. Citigroup joined the bears, highlighting the impact of a recession on future earnings, while Morgan Stanley switched its stance from "cautious" to "in-line", saying that, given current valuations, it was "tougher to continue to be underweight the market".

Morgan Stanley added: "While we prefer to focus on individual stocks than the overall sector, we are struck that 40 per cent of the European banks we cover are either below or no more than 10 per cent above our bear-case valuations, and on average we see only 19 per cent downside to our bear cases.

"Unless our bear cases become the base or bullish cases, due to widespread systemic issues, we feel much is now priced in."

The wider sector was mixed and Alliance & Leicester was up 8.5p at 351p while Lloyds TSB lost 8.5p to 338p.

The FTSE 100 lost 87.6 to 5,362.3 while the FTSE 250 was down 182.6 at 9,007.2. British Airways was the weakest on the London benchmark, down more than 8 per cent or 21.25p at 242p, after the FTSE 250-listed peer easyJet, down 10.14 per cent or 37.5p at 332.5p, published a disappointing third-quarter update.

But much of the damage was done by the resource stocks, which tracked lower commodities prices. Eurasian Natural Resources Corporation, the Kazakh mining group, eased to 949p, down 6.5 per cent or 66p, at second place on the loser board, while Tullow Oil lost 40.5p to 725p.

Early losses on Wall Street also bore on the senior index. American investor sentiment dipped after the National Association of Realtors said the number of homes sold in the US fell 15.5 per cent in June compared to last year.

Among individual stocks, the news hit Wolseley the hardest. The construction materials group, which was down 6.41 per cent or 22.5p at 328.5p, has often attracted market concern, owing to its exposure to the US housing market.

The news from America also hit the mid-cap house builders and Barratt Developments lost 7.05 per cent or 7.75p to 102.25p. Bovis Homes was down 5.55 per cent or 21.75p at 370p and Persimmon eased 6.5p to 348.75p. Taylor Wimpey was also weak and lost 1.5p to 48.75p.

Beside the read-across, the sector was hurt by comments from Cazenove, whose analysts said that the recent relief rally was "too optimistic" The broker said: "The lows of early July may have factored in worse news than was actually announced, but it is our view that this is no longer the case, and that the news flow over the summer and the outlook statements during the reporting season in late August and early September will take the shine off the sector again."

The retailers were hit by official data which revealed that retail sales volumes fell 3.9 per cent between May and June, the biggest slump since records began in 1986.

As a result, DSG International was down 8.16 per cent or 4p at 45p. The video games retailer Game was also down and lost 3.65 per cent or 9.5p to 250.5p, despite being added to the "conviction buy" list at Goldman Sachs.

Among smaller companies, the electronics distributor ACAL slumped 25.71 per cent or 45p to 130p after the company published a disappointing trading update, announced the end of offer talks and said the chief executive Tony Laughton was stepping down from his post.

Elsewhere, Coffeeheaven International was flat at 41p as bid talk resurfaced. Traders again cited rumours of possible interest from the FTSE 100-listed Whitbread, which was down 27p at 1132p last night.