Market update - 5 August

The FTSE 100 was up 96.8 points at 5417 and the FTSE 250 309.8 points at 9097.4 at 11.58am today. Michael Page was monopolising the market’s attention this morning, up 33.84 per cent or 89.75p at 355p.

The company confirmed speculation that Adecco, the Swiss recruitment giant, was considering a takeover. Michael Page said that Adecco had already made an unsolicited preliminary approach, subject to a number of waivable pre-conditions, including due diligence. Brokers soon weighed in, assessing the possibility of a successful deal.

“Following some well-informed press speculation in this morning’s Independent, Michael Page has confirmed it has received an unsolicited preliminary approach from Adecco, the Swiss recruitment company, regarding a possible offer for the group. Although the two companies have been linked in the past, investors should be aware that they operate different business models in difference sectors of the market - Michael Page is more focused on white collar recruitment, whilst Adecco targets the blue collar market,” said Jonathan Jackson, analyst at Killik Capital.

Cazenove highlighted the premium required to takeover the staffing group, saying: “Adecco may believe that it had a once in a cycle opportunity to acquire MPI. Whilst a bid premium of up to 42 per cent may be attractive to some, other Michael Page investors may be unwilling to sell out at a depressed valuation when the shares were trading at 600p a year ago.”

The prospect of consolidation excited other staffing groups and Hays was up more than 15 per cent or 12.25p at 93.5p. SThree gained more than 10 per cent or 19.5p at 210.5p.

The news in Michael Page also moved stocks outside the recruitment sector. Traders said confirmation of the Adecco approach had highlighted the possibility of M&A activity in other depressed sectors. Media stocks in particular were in focus as investors bet on the possibility of deal activity, thereby prompting a round of short covering. As a result, Johnston Press was up more than 15 per cent or 6.25p at 46.25p. Trinity Mirror gained 12.83 per cent or 14.75p to 129.75p and Yell was up 9.45 per cent or 7.75p at 89.75p.

Moving up

Wolseley maintained its place at the top of the FTSE 100, up more than 14 per cent or 50.25p at 403.5p. The debt-laden construction materials group continues to draw strength from market speculation that it may dispose of Stock Building Supply, its North Carolina-based subsidiary.

Insurance stocks were pleased by a strong set of numbers from Legal & General, which gained 7.1p to 103.7p. Standard Life was up 17.25p at 240.5p and Old Mutual advanced to 104.7p, up 6.5p.

The banking sector was helped by news from Barclays, which has agreed to sell is life assurance arm to Swiss Re, and Standard Chartered, whose results met analyst expectations this morning. Barclays was up 26p at 365.25p and Standard Chartered climbed to 1489p, up 66p.

Commenting on Standard Chartered, Alex Potter at Collins Stewart said:

“STAN management see Asian economies as much stronger than during the late-90s problems and that Asian growth will be stronger than OECD growth - this is more positive than HSBC comments yesterday.”

Elsewhere, weaker oil prices drove British Airways, which gained 16.25p to 271.25p. Thomas Cook, up 17,75p to 217.75p, and TUI Travel, up 61.1p at 211.5p, also drew strength from improved commodities prices.

Moving down

Lower commodities prices continued to weigh on the resource stocks and Tullow Oil was the weakest on the FTSE 100, down 43.5p at 724p. The Eurasian Natural Resources Corporation was down 51.5p at 946.5p and BG lost 32p to 1054p.

British Energy was weaker by 16.5p at 701.5p as hopes of a deal with Centrica, up 3.25p at 300.5, faded.

Scottish & Southern Energy was down 14p at 1371p after unveiling a £750,000 investment in Green Highland Renewables in return for a 33.3 per cent share of the company.

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