Market Report: Yell driven up by Invesco stake-building

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The Independent Online

Stake-building and talk of a possible refinancing deal boosted Yell, the directories group, which advanced 11.8 per cent, or 9.5p, to 90p yesterday.

Last month, Yell said it had begun talks to negotiate additional headroom on its debt covenants with its lenders, a number of whom, the company said, had pre-approved the request in principle. Last night, the market rumour mill suggested that the lenders had agreed on the fine print, giving the company additional breathing space despite prevailing market conditions.

Traders, while hopeful that the talks will reach a positive end, were sceptical about such a swift decision. A dec-ision is not expected for a few months, they said.

A firmer source of support for the shares, traders added, was the move by investment fund Invesco, announced last night, to increase its stake in the business to more than 20 per cent.

Overall, early losses on Wall Street proved a drag on the FTSE 100, which closed down 89.25 points at 4,870.34. The FTSE 250, although up 51.09 points at 7,965.48, was also dragged down from its intra-day high of 8,200.26.

American indices were under pressure after corporate giant General Electric moved to raise cash and a new rep-ort revealed that US jobless claims had reached a seven-year high. Investors were also nervous before the second House of Representatives vote on the Bush administration's $700bn banking bailout proposal.

In the UK banking sector, HBOS traded up, gaining 14.85 per cent or 22p to 170.1p, after Oriel Securities said that Lloyds TSB, which gained 12p to 262p, was unlikely to negotiate the terms of its merger offer. "The competition waiver is such a gift for Lloyds that the original terms are likely to be seen by management as a price worth paying," the broker said.

Marks & Spencer bounced to 227.25p, up 8.09 per cent or 17p, after assurances about the dividend and cost-cutting measures offset the impact of a weak trading report, thereby prompting a bear squeeze. Nick Bubb, retail analyst at Pali International, said that the 22.5p-per-share divided is safe for this year but "next year is a different story: we still expect a dividend cut to 16p".

Also on the upside, BSkyB, up 13.25p at 429.5p, swung to sixth place on the FTSE 100 leaderboard after Bernstein said that while the company is not immune to an economic slowdown, it remains a defensive bet in the current turbulent times. "Given that pay-TV only accounts for 1.3 per cent of household expenditure on average, we would expect other expenses such as eating out (2.8 per cent) to be cut first for the majority of households," the broker said, reiterating its "outperform" rating.

JP Morgan aided Firstgroup, the transport group, which advanced 3p to 542p after the broker increased its target price for the stock from 622p to 674p. "Like its peers, [Firstgroup's] free cash generation means that we project organically driven debt de-leverage in the next three years," the broker said. JP Morgan maintains a "neutral" rating on the shares.

Morgan Stanley weighed in on Vodafone, the telecoms group, which was up 1.8p at 126.85p. "Our survey of 5,000 Europeans suggests still limited cyclical impact in Spain and UK and an improving picture in Germany, France and Italy," the broker said, highlighting Vodafone as its preferred UK telecoms business.

At the other end of the index, weaker oil and metals prices held back the leading resource stocks. Vedanta Res-ources, the biggest loser in the FTSE 100, was hit the hardest, losing 11.88 per cent or 123p to 912p. Rio Tinto eased back to 3,210p, down 277p, and Anglo American was down 144p at 1,704p.

In the oil and gas sector, Tullow Oil was down 10.2 per cent or 72.5p at 638.5p and BG lost 7.83 per cent or 79p to 930p.

On the FTSE 250, the engineering group Cookson was down 4.25 per cent or 19.5p at 439.5p after Panmure Gordon reduced its target price for the stock from 700p to 500p.

"The economic slowdown is clearly moving from the financial world into the industrial world (led by construction, automotives and electronics)," the broker said, keeping the stock at "hold". It added: "As a result, we do not have the confidence to raise Cookson to a 'buy', despite its sharp valuation de-rating."

Among smaller companies, Woolworths was down 0.05p at 4.2p after Panmure reiterated its "sell" advice, lowering its target price for the stock from 4p to 3p.

Noting that it was a "no-brainer that a retailer which seems to be struggling to get stock ahead of its more important trading period [ie Christmas] represents a risky investment", the broker said: "The market capitalisation of £62m accounts for just 17 per cent of the enterprise value and could be wiped out at the stroke of a creditor's pen."