Market Report: Cairn investors find a devil in offer's details

The prospect of Cairn Energy's initial public offering of its Indian operations has supported the price against a falling oil market, but the devil is in the details and the publication of the offer documents sent the shares into freefall.

The retention of 69.5 per cent of Cairn India by the UK-listed parent means that less of the proceeds will be available to UK shareholders. A slightly bizarre research note from the Dutch broker ABN Amrodid not help the stock. The broker reiterated its "buy" recommendation but with an 1,800p target. Seeing as the shares closed on Wednesday at 1,907p, the bank's clients probably won't be too happy if the target is hit. As it happens, the news on the Indian IPO was enough to send the shares 215p lower to 1,673p, before a late rally saw the shares close at 1,835p, 53p worse.

Banking stocks were in focus once again as a rumour did the rounds that the US banking giant Citigroup, the world's largest financial group, is poised to make a large European acquisition. The word among traders is that it will be the French bank Société Générale, but traders were also backing Barclays, 12.5p better at 722p, a new high, and Lloyds TSB, 4.5p firmer at 559p.

In the wider market, strong earnings figures from several US stocks, including McDonald's and Costco, sent the Dow Jones sharply higher, helping the FTSE100 to climb 47.8 by the close to 6121.3. Property and mining stocks were the key drivers in London - British Land added 27p to 1,432p, with Land Securities up 22p to close at 2,030p. The London blue chip index is now 16 points short of a new intra-day high for the year.

It isn't every day that a stock rises almost 8 per cent after delivering a profit warning, but that is exactly what shares in the paper and packaging group DS Smith did yesterday. The company warned in September that first-half profits will be much lower than anticipated, so traders put yesterday's rise down to a combination of a relief rally and short covering. A bullish sector note from Citigroup also helped the shares to climb 12p to 167.25p.

A bout of vague bid speculation got traders excited about FirstGroup, the transportation group, sending the shares 29p firmer to close at 538p. With the utility sector having taken just about as much bid chat as it can take, traders are busy looking for the next sector that will attract the interest of private equity cash. Rivals National Express and Arriva were also well bid, closing 21p better at 948p and 10.5p better at 675.5p respectively. All three stocks are trading at all-time highs.

It looks like traders do not believe rumours that United Business Media, the publishing group, is about to attempt a management buy-out. The shares rallied in early trade as talk did the rounds that the group will offer shareholders 750p to take the company private, but by the close sellers had cashed in, sending the shares 2.5p worse by the close to 681p.

Another mid cap takeover tale surrounds the housebuilder Taylor Woodrow. Bid speculation in the sector has been quiet for a while, after a hatful of stories in the spring and summer. Given the premium that McCarthy & Stone attracted, it is a sector that few investors are prepared to go short of. Taylor Woodrow closed 11.25p firmer at 381.25p.

In the small caps, follow-through buying after Wednesday's bullish trading statement in International Medical Devices sent the shares 1.25p better to 4.87p, the best performer in the smaller end of the market. The broker Corporate Synergy also upgraded the shares, telling clients that the current rating does not reflect the company's growth prospects.

Central African Mining rallied 2p to close at 39p, but market makers put the jump down to some short covering rather than genuine buying support. The word in the market is that a large number of short sellers are looking to take out positions in the stock but are being put off by the fact that the respected investment bank Credit Suisse has given the company lots of support.

Among the disasters of the day was Betcorp, after the company warned investors that the anti-gaming legislation in the United States will have a "very serious impact" on group revenues. The shares lost another 15.5p yesterday to close at 15p.

Finally, It was an even worse day for Cartucho Group, the printer ink cartridges company, after a big order failed to materialise, leading to a severe warning on full-year results. Ian Diery, chairman, and Michael Willcocks, chief executive, paid for the warning with their jobs, as the shares tanked to close at 3.12p, down 5.63p, a loss of 64.3 per cent.