Market update - 14 July

The FTSE 100 was up 102.7 points at 5364.3 at 11.41am today, still in bear market territory. ITV claimed first place on the leader board, up more than 13 per cent or 5.3p at 43.6p, following weekend reports highlighting the possibility of a bid from Endemol, the producer of the Big Brother reality-TV series. The broadcaster was also boosted by Morgan Stanley, whose analysts moved the stock to “equal-weight” from “underweight”.

On the FTSE 250, Alliance & Leicester shone, up 47.32 per cent or 103.75p at 323p, after Santander, the Spanish banking group, made a recommend 299p per share offer. Santander will offer one its shares for every three in A&L beside a cash dividend of 18p per A&L share in the £1.259bn deal.

Also in the FTSE 250, Imperial Energy climbed by almost 20 per cent or 150.5p to 922.5p after confirming an offer approach, believed to be from the Oil & Natural Gas Corporation of India, or ONGC, the state oil & gas company.

Moving up

The news from Alliance & Leicester cheered the banking sector, which was depressed by problems at Fannie Mae and Freddie Mac on Friday. FTSE 250-listed Bradford & Bingley got the biggest boost, up 12.63 per cent or 6p at 53.5p. Barclays was up 13.25p at 281p, HBOS gained 6.25p to 272.75p and Lloyds TSB rose by 16.5p to 292p. The Royal Bank of Scotland was also up, gaining 7p to 189.7p. Traders said some of the strength in the sector was down to short closing, as hedge funds moved to limit their losses in the face of rising share prices. So far, the banks had been a prime target for short seller, who bet on declining share prices.

Also on the upside, Kazakhmys gained 113p to 1540p and claimed second place on the FTSE 100 following speculation of a possible merger with Metalloinvest, the Russian metals group.

Moving down

J Sainsbury was one of the few companies in negative territory on the FTSE 100, down 0.25p at 270.75p after Panmure Gordon reduced its target price for the stock to 240p from 260p.

“We believe that poor retail conditions will hit the food retailers late cycle and we are now assuming that margins decline at Sainsbury next year, which reduces our forecast by 10 per cent,” the broker said, adding:

“We believe that Sainsbury now faces its perennial problem, one that successive managements have failed to resolve, namely that most of its customers don.t care about price, but the marginal, profitable ones do and they are highly promiscuous. Now that the pressure on consumers. disposable income is increasing, the access to cheap credit has disappeared and, importantly, the discounters are a much more meaningful presence than they were during the last recession, we believe that Sainsbury will struggle to hold onto a meaningful chunk of its customer base.”

Part of the house building sector was also down after returning recent gains. Last week, the sector was buoyed by reports that private equity may snap up to a third of Taylor Wimpey. This morning, as the speculators took profits, Taylor Wimpey lost 2p to 37.75p and Barratt Developments was down 2.5p at 68.75p.