Market Report: Property rebounds but foundations look shaky

UK property shares rebounded yesterday, reversing a two-week trend of beatings, yet some fear it is a brief respite before stocks nosedive again. British Land was the pick on a day when the whole sector rallied, closing up 22p at 1,362p, among the top FTSE 100 climbers. One trader said: "Property companies have been slaughtered over the past 10 days because of interest rate fears. They have really been oversold, so this was a chance to bounce back with the market." Land Securities also finished the day on a high, closing up 19p at 1,746p. Others sounded a note of caution. "I don't think property stocks will hold," one said. "This seems like nothing more than a relief rally."

The FTSE 100 clawed back the 31-point loss from Wednesday to finish 43.7 higher at 6,571.3 on the back of rising oil and commodities. BHP Billiton ended the day as the top mining stock, up 41p at 1,386p, while Shell was the pick of the oil firms, 52p higher at 2,060p.

Rumours of a takeover or potentially lucrative break-up at Smiths Group continue to sweep the market, although no firm interest has yet emerged. This failed to put off investors as the stock closed up 19p on 1,171p. Such generosity did not abound at Scottish & Newcastle, another perennial takeover target, after news that one of its directors had sold more than £50,000 worth of shares yesterday. One market maker said the sale put paid to the bid rumours that had been reignited earlier this month.

Tesco has had a sinking feeling all week and it got no better as it shed 1.25p to 421.5p. This comes as management braces itself for another fight at its annual general meeting today over pay packages for the top brass.

Dark clouds are also looming for clothing retailers in the UK. Brokers are predicting several high-profile casualties in the mid tier from June's downpours and fears over a slowdown in consumer spending. After weather issues were blamed for Marks & Spencer's slump yesterday, Panmure Gordon said worse was to come for Debenhams and added that Sports Direct International would be affected as well.

Traders held their nerve in Debenhams, despite the gloomy forecast coming on the back of a recent profits warning and management admitting they are months off turning sales around. The stock closed up 0.5p at 127.5p. Mike Ashley's Sports Direct was hit by the note, closing down 4p at 183.5p.

Bid talk sparked a tremendous rise for Domestic & General, after management admitted yesterday it had received several approaches for a full takeover. While the company refused to name names, it admitted there were "interested parties"; one was named last month as Homeserve. This helped gloss over the revelation that losing a contract in its call centre division meant full-year operating profits could be hit by £1.5m. The group, which revealed a strong warranty business, closed top of the mid-tier risers, up 134p - more than 10 per cent - at 1,361p.

Bus and rail operators have been motoring nicely this week. After successful trading updates for Stagecoach and Go-Ahead Group, Arriva followed suit yesterday, finishing up 2p at 678.5p. The market was bullish after it revealed its first contract win in Poland and the acquisition of a 49 per cent stake in Italy's SPT Linea.

On AIM, the property group Rok has suffered, dropping like a stone from a peak of 251p three weeks ago. Altium Securities upgraded it yesterday and the market approved, sending its shares up 16p to 232p on expectations of a strong first-half trading statement next week.

Traders piled into Cambridge Minerals. The small-cap stock, which had trading volumes of 80 million in the past three months, was deluged by 30 million trades yesterday.

Another stock to catch traders' eyes was Leyshon Resources, a Chinese gold miner. After a steady slide since peaking in January, investors have returned, with the stock up 13 per cent over the past two weeks. The volume was unusually high yesterday, at 1.5 million.

Finally, sad news for London's growth market. Deutsche Land, which reported its maiden results yesterday, announced the death of its co-chief executive Klaus Fassbender at the age of 54 after a short illness. Shares in the German property investor held firm at 84p, as it unveiled an operating profit of €7.2m for the year ending 31 January, its first results statement since the initial public offering on AIM in April last year. David Maxwell, joint head with Mr Fassbender and the youngest chief executive in the London markets at the age of 28, has taken sole charge in the interim.