Market Report: Vodafone rings up gains amid bid talk

Takeover rumours buzzed around the telecoms sector again yesterday, helping Vodafone call up a spot among the blue-chip risers. Vodafone, which is said to be poised to raise its £6bn-plus takeover approach for German cable company Kabel Deutschland, had been nursing losses last week, falling below 180p. But bargain hunters returned yesterday amid speculation that US giant AT&T was linked to an approach for Spain's Telefonica, the owner of British mobile network O2.

Analysts said AT&T's rumoured move could prompt rival Verizon to look again at the possibility of buying Vodafone.AT&T has previously been linked with BT and Telecom Italia. Reports claimed Madrid's government had blocked a formal €70bn (£59bn) bid for Telefonica. The rumoured approach was denied in Spain but the chat still pushed Vodafone up 2.65p to 182.7p

Meanwhile the rest of the market ignored the gathering of the great and the good at Lough Erne for the two-day G8 summit yesterday and focused instead on guessing what US Federal Reserve chairman Ben Bernanke will say at the Federal Open Market Committee meeting tomorrow. The question is will he cut back on stimulus measures soon, and if so by how much?

Colin Cieszynski, a senior market analyst at CMC Markets, said: "Stocks and currencies have been very active over the last six months off the back of changes to QE programmes, particularly in the US and Japan, and have become quite dependent on announcements of additional QE to keep over-extended trends going."

Having finished lower for the fourth week in a row last week – the worst run of weekly closes since April last year – the FTSE 100 index advanced 22.23 points to 6,330.49 as bullish investors decided to bet that Mr Bernanke will leave the money taps on for now.

Aggreko was top of the benchmark index after a buy note from analysts at Numis. The temporary power supplier surged 66p to 1,791p ahead of its trading update due today.

Punters took a look at consumer goods groups on the advice of analysts at Citi, who think the sector is still cheap "even after its strong run in the last 12 months". Some investors had been concerned about cleaning products-to-drugs group Reckitt Benckiser and the performance of its heroin addiction drug Suboxone after the opening of the markets to generics. But Citi thinks it has shown signs of "early resilience" and is worth a buy at 5,450p. The owner of Mr Sheen, Cillit Bang and French's mustard brands cleaned up with a 100p rise to 4,679p.

The insurance sector was also in focus on news that Legal & General has promoted its head of savings, Mark Gregory, to finance director. The shares dipped 0.3p to 170.6p. Insurer Resolution got a boost from JP Morgan's scribblers who raised their target price from 273p to 302p and rated the shares neutral as "cost savings and improving market conditions underpin its strong dividend yield". Resolution racked up an 8p gain to 283.1p.

Angela Ahrendts, the chief executive of Burberry invested her bonus for the year ending April 2013 in the luxury group's shares, buying 59,689 at 1,362.2p, while the outgoing finance boss Stacey Cartwright sold 214,944 shares. Burberry, which will host its first menswear fashion show in London today after showing in Milan, added 29p to 1,399p.

Oil services group Petrofac was hit by news that Italian rival Saipem cut its outlook. Petrofac slipped 36p to 1,288p.

The wooden spoon went to the smartphone microchip designer Arm Holdings. Analysts at Numis downgraded it to reduce and said US rival Intel "has made a breakthrough in finally having competitive chips for smartphones". Arm declined 32p to 830p.

Fellow UK microchip designer Imagination Technologies, also suffered and was 10.7p worse off at 304.7p.

Scribes at UBS reduced their price target for transport operator First Group after its rights issue to 100p from 150p. The shares reversed 1.7p to 92p.

APR Energy surged 70p to 910p after revealing it has expanded its existing contract in Libya.

Technology equipment provider BATM Advanced Communications has been picked, as part of a consortium, to roll out fibre optic broadband and internet in Israel, and the shares beamed up 0.75p to 15.75p. On AIM, Leyshon Resources lost 5p to 11p after revealing a setback at its Zijinshan gas project in China.

Buy: Majestic Wine

Drink to Majestic, Canaccord Genuity recommends. Its analysts say the shares have underperformed the general retail sector by 36 per cent in the past year, and they reckon this is "overdone". The off-licences group's strong returns and expansion strategy are a reason to buy, they add, setting a 505p price target for shares that are currently 462p.

Sell: Travis Perkins

Flog shares in Travis Perkins, Jefferies suggests. The broker warns that the "exceptional performance" of the builders' merchant shares in the past year "in the face of declining earnings estimates" has left it too far ahead. It admits the group has "sector-leading market share and margins" and a "well-respected management team" but says it is still too expensive. It rates the shares, which are 1,517p, at 1,120p.

Hold: Immunodiagnostic systems

Hang on to shares in Immunodiagnostic Systems, the clinical research specialist, Investec insists. Its results yesterday showed reduced revenues as a result of tough trading conditions but the figures were in line with analysts' expectations. Investec wants to see bottom-line growth, and retains its hold rating with a 460p price target for shares that are at 447.5p.

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