Market Report: Tui Travel on the climb as talk of takeover is revived

Just because it is one of the longest-running tales in the Square Mile does not mean a takeover of Tui Travel may not happen one day. Talk that Germany's Tui AG could be about to buy the 45.5 per cent of the tour operator it does not already own has done the rounds for years, but yesterday hopes were being raised that this time it really could happen.

The latest revival of the speculation was down to UBS's Daniel Stillit, who said a deal between the two was looking "increasingly plausible". Adding Tui to the broker's "Watch List" of possible takeover targets, he argued that a move would not only give Tui AG full control of its fastest growing business but also help it focus on the travel and leisure side of the company.

Mr Stillit's colleague Alex Brignall was another giving Tui a push, as he said the recent fears around the travel sector had provided an "attractive entry point". Although Tui has avoided the problems of rival tour operator Thomas Cook (up 0.25p to 15.5p) – which is now a small-cap stock after needing to be saved by its lenders last year – its share price has still dropped nearly 40 per cent over the past 12 months.

The combination of Mr Brignall recommending Tui as a "buy" and the return of the takeover whispers helped Tui fly as high as 168.3p during trading. However, with many believing Tui AG needs to get rid of its stake in shipping firm Hapag-Lloyd before it can make an approach, the group was just 3.2p better off at 164.9p by by the bell.

Sentiment around the travel groups was not helped by the fallout from the tragic capsizing on Friday of Carnival's Costa Concordia ship off Italy. Unsurprising, the cruise giant led the blue-chip index down, slumping 16.46 per cent to 1,878p, after estimating the accident could cost its $90m (£59m) in lost earnings.

With the shutters up on Wall Street for Martin Luther King Day, the lack of action in the States translated into a relatively quiet session for the Square Mile, leaving traders free to fret about the eurozone after Standard & Poor's downgraded a number of countries' credit ratings late on Friday,

Yet despite concerns over what this means for the region's ESFS bailout fund, the FTSE 100 still edged up 20.8 points to 5,657.44 as a relatively successful bond auction showed France there was life after the loss of its triple-A rating,

Nonetheless, some of the banks ended up deep in the red, with Lloyds and Barclays dipping 0.04p to 29.47p and 2.1p to 199.1p respectively. However Royal Bank of Scotland managed to creep up 0.32p to 24.42p, meaning it has gained more than 12 per cent since announcing a major shake-up of its investment banking operations last Thursday.

Elsewhere, Pearson powered ahead 33p to 1,250p after UBS's Alastair Reid claimed the group – which publishes textbooks as well as the Financial Times – was well-placed to benefit from an expected push by Apple to encourage the use of technology in school.

After a profits warning forced it to lose over 19 per cent on Friday, Invensys was unable to mount even a minor fightback as the engineer slipped 0.2p to 183p on the FTSE 250. Its woes helped revive speculation it could become a bid target, but RBC moved quickly to rubbish the idea.

Many expect a resolution of its pension deficit to be the trigger for a bidder to emerge, yet the broker's analysts warned there were still a number of other issues, such as risks with its current contracts, that would make any potential aggressors think twice.

Inmarsat was in freefall after its partner LightSquared's plans to build a wireless network across the United States were dealt a major blow. Advisers to the Federal Communications Commission said testing had found the technology interfered with GPS receivers, casting serious questions over the future of the scheme. With JPMorgan Cazenove saying 100p of its 800p target price for Inmarsat comes from the tie-up, it was never going to be taken well and the group plummeted 5.31 per cent to 397.7p. Morgan Stanley's Terence Tsui didn't help by keeping his "underperform" rating after pointing out that shipping giant Maersk appears to have chosen a rival firm for a new contract.

The mid-tier retailers were high up the leaderboard, including Home Retail. The Argos owner – which continued to be the subject of vague takeover speculation – was lifted 4.4p to 89.53p even as Nomura's Christopher Walker slashed his price target by over a third to 73p.

Down on AIM, Beowulf Mining dropped 15.31 per cent to 10.38p after being hit by a challenge to its drilling programme. The local Sami community in the north of Sweden has lodged a complaint against the mineral explorer's plans, saying they will disrupt reindeer herding. As a result, work has been suspended for negotiations to take place.