Market Report: More takeover chatter boosts mining stocks

More merger talk in the mining sector: Xstratamay make a bid for Anglo-American and CreditSuisse thinks that the time is right. A nickel-price rally saw Xstrata acquire Falconbridge last year, and the climbing price of platinum may persuade it to step into the fray for Anglo-American. A rumour pegs the prospective bid at 36 a share, below Credit Suisse's estimate of 42 a share if things were done differently and Anglo-American were to bid for Xstrata. By the close the chatter had boosted Anglo's stock by more than 4 per cent, up 132p to 3286p. Xstrata also gained from the rumours, rising 106p to 3419p, up a little more than 3 per cent.

Vedanta Resources rallied again as the price of copper rose and the market maintained its prayer for further consolidation in the industry. The stock rose by more than 5 per cent, up 112p to 2304p.

There was also a rally in the banking sector as Alliance & Leicester kept up the momentum from Thursday despite a downgrade from peer-perform to under-perform by the broker Bear Stearns. The company's shares rose by 6.41 per cent during day, climbing 44p to close at 730p. Barclays and the Royal Bank of Scotland also did well, rising 23p to 563p and 15.75p to 459p respectively by closing time.

ABN Amro downgraded the pub and restaurant group Mitchells & Butlers, making it one of the big fallers yesterday. ABN slashed its target and moved the stock from a "buy" to a "hold" recommendation, citing the risk attached to the company's plans for converting its 5bn property portfolio into a real estate investment trust. M&B shares fell by 8.5p to close at 577p. Marston's, another pub company, managed to remain firm despite reporting a fall in pre-tax profit. After easing up in early trade, the company's shares managed to gain 12.5p by the end of the day, closing at 336p. A third pub group, Enterprise Inns, which reported a drop in profits last week, closed down yesterday, falling by 10p to 532p.

There was some speculation about who may leave the FTSE 100 club. In addition to the embattled Northern Rock, which gained a bit on the index yesterday, up 1.3p to 118p, DSG International, the retail group which announced a 25 per cent fall in underlying pre-tax profits recently, is widely expected to drop out in the December reshuffle. The company's stock, which has almost halved in the past year, was down by 0.9p yesterday, closing at 112.6p. Barratt Developments, whose stock closed up 5.5p at 465.25p yesterday, is also expected to be on its way out as it fears lower house prices in the coming year.

Corporate activity gossip was also the cause of a surge in Colt Telecom's share price. There was speculation about a bid for the company by the North American giant AT&T, which is said to have offered around 250p per share. A statement from Colt, in which it said it saw "no reason" for the rally, did not stop traders as they added 27.75p to the company's shares, taking them to 182.25 at closing time.

Elsewhere, among the small caps, Johnson Service Group, which rallied earlier in the week owing to speculation about a bid from the Scandinavian private equity group Industri Kapital, remained firm, despite announcing that it will not be paying the promised 3p per share dividend to its shareholders. The company was ahead in the small caps, rising by 18p to 59p at closing time.

Vega, the technology services company, also did well, despite a downgrade by Charles Stanley from "add" to "hold". The broker, while not ruling out a better offer, thinks Finmeccanica's 280p per share bid for the company is acceptable considering the weak IT spending outlook. Shares in the company rose by 32.5p to 272p.

Among the losers, the digital kiosk-maker Felix Group took a hit as it announced a review of the "viability" of its business model, depressing the stock by a massive 78.4 per cent over the course of the day, closing down 4.9p at 1.35p. Dawmed Systems came up just behind Felix after telling the market that it expects to make a full-year loss. The medical equipment maker saw its stock drop 29.41 per cent, by 1.25p, to 3p.

Reflec also had a bad day as it posted a 51 per cent drop in pre-tax profits; the stock dropped by 5p to 14p at closing time.

CBay Systems, an India outsourcing company that services the US healthcare industry, rose by more than 9 per cent on the back of strong institutional demand, rising by 7.5p to 89.5p.

And finally, Hellenic Carriers, an operator of dry bulk vessels, made its debut yesterday. The market valued the company at 96.7m as it raised 29m at a price of 223p per share.