Market Report: Peacock flies higher as takeover rumours swirl

Last month, the group said its management wants to buy the company for 340.5p a share, valuing it at £404m. Buyout negotiations are being led by Mr Kirk and the finance director Keith Bryant, and any deal is likely to be financed by two hedge funds - Och Ziff and Perry Capital. The duo are said to have helped the US entrepreneur Malcolm Glazer fund his takeover of Manchester United. Goldman Sachs has also been reported as playing a role in bid negotiations at Peacock. Should a deal go through the US investment bank is expected to get a stake in the private company.

Given the state of the high street, it is likely that Peacock shareholders will welcome a cash bid. Recent updates from rival retailers have been dire, and conditions in the sector have deteriorated since Peacock first admitted to being in offer talks back in August.

Pilkington, another company where trading of shares has recently been dominated by takeover speculation, rose 3.5p to 127.75p in heavy volume. Punters once again bet that the glass maker's days as an independent entity are numbered.

It was a bad day for the wider market. The FTSE 100 slumped 45 points to 5,182.8 while the FTSE 250 dropped 98.5 points to 7,534.9. Sentiment towards London shares was not helped by losses on Wall Street. Across the Atlantic investors were unnerved by news that car giant General Motors had been subpoenaed by the US Securities and Exchange Commission as part of an investigation into its accounting practices.

BG Group, down 18.5p to 489.5p, PartyGaming, off 3.25p to 87p, and British Airways, 8.75p weaker at 287p, were among the worst performers in the blue-chip index. SABMiller dropped 17p to 1,021p after its US rival, Anheuser-Busch, posted weak third-quarter results and downgraded its forecasts for the full year.

Smith & Nephew bucked the negative trend in the market, gaining 14.5p to 466p, as the medical devices group assured its investors that it is on track to meet its targets. Intertek rose 2p to 704p on rumours that Switzerland's Société Générale De Surveillance is mulling a bid for the UK testing company.

GCap Media lost 13p to 315p as the latest radio audience data showed its flagship station is losing listeners at a worrying pace. According to figures from industry body Rajar, Capital Radio saw its share of the London audience fall to 5.1 per cent in the third quarter from 6.1 per cent in the previous quarter. Its biggest countrywide station, Classic FM, saw its portion of the national audience fall to 4.1 per cent from 4.3 per cent in the second quarter.

Teather & Greenwood argued that Chrysalis, off 3.5p to 130.25p, was the clear winner from the market-share data. The group again came top in London with the highest listening figure gains. The broker believes this was largely at the expense of Capital Radio.

Northern Foods gave up 1.5p to 147.25p as ABN Amro downgraded its full-year profit forecasts for the group. In the face of higher energy costs the Dutch broker fears thefood maker's 2007 targets "look increasingly unachievable". Given the tough trading conditions in the sector, ABN said it would not be surprised if Northern Foods was forced to downgrade its earnings forecasts yet again. The broker also warned that any significant restructuring at the company could put its dividend at risk.

Lower down the pecking order, Landore Resources was steady at 8p despite talk of bullish news being likely from the North America-focused gold miner in the coming months. Directors have been busy hoovering up Landore stock of late. Most recently, William Humphries, the group's chairman, picked up 500,000 shares at 7p. Matrix Communications added 6.5p to 152.5p as the IT services group confirmed speculation that it has received an offer for its Fujin division.

Similarly, Communisis admitted to being in talks aimed at a takeover of the whole company. But the group warned that negotiations are at a very early stage. Numis Securities urged its clients to reduce their exposure to the printing services group. "Fundamentals suggest the shares remain overvalued", the broker said.

Finally, Petra Diamonds added 1.5p to 62p as the company hinted that its flagship Alto Cuilo project in Angola is likely to end up producing more diamonds than originally thought.