Market Report: Talk of Chinese bid sparks interest in Centrica

Rumours that a foreign power is plotting to take out Centrica are as old as the hills. Time and time again it has been heavily linked with a bid from Gazprom, the Russian giant.

While stories of rival European bidders emerged in June, talk yesterday was of interest from further east. Traders were hearing that a Chinese group could be preparing a bid. One trader said the shares were "looking lively" as the news swept the market, but it ended the day 0.25p down at 368.75p.

It was a relatively quiet session with one trader saying "it feels like it has run out of steam". The FTSE 100 reversed early gains as it fell 52 points in the morning although it managed to close only 28.5 points weaker at 6,536.9 led down by the property stocks. The sector stumbled in the wake of news that New Star Asset Management's property portfolio had lost 17.8 per cent since the end of July. The London-based real estate investment trust British Land was weakest, down 4.06 per cent to 949p, followed by Hammerson, down 2.01 per cent at 1074p.

Northern Rock, no stranger to the foot of the table, ended the day there once more. It sunk 4.66 per cent to 104.4p on reports that its future was unlikely to be resolved before the middle of January.

A bearish report from Goldman Sachs knocked the stuffing out of Scottish & Southern Energy in the morning. The powerhouse broker added Scottish to its "conviction sell" list, sending it down 35p, although it later rebounded to close 10p down at 1620p. Goldman said: "We expect no positive newsflow in the near term, in contrast to other sector names. Given this and a high valuation, we expect underperformance."

It was a mixed day for the miners, with Rio Tinto off 104p to 5680p as investors took profits on the back of the previous day's rumours. But the warm glow of takeover speculation continued to lift Xstrata, sending it to the top of the leaderboard in the morning. The group continues to burst through record levels, setting its latest high of 3738p, up 2.24 per cent. It was supported by Lehman Brothers, which lifted its price target from 4000p to 4300p. There was also talk of Xstrata launching a big convertible bond after the market shut.

Oil companies were up on consolidation talk and a strengthening oil price. BG Group was the pick, up 3.75 per cent at 1079p.

The pub chain Whitbread was given a pat on the back from investors after releasing a trading statement of its own. It has been an uncomfortable month for the company, but it was up 10p to 1434p yesterday as it reported like-for-like sales of 5.8 per cent for the past 39 weeks.

Topping the second line was Thomas Cook, which climbed 6.77 per cent to 276p, on a trading update. It revealed it expects a 26 per cent rise in full-year pro forma operating profits. The travel agency also announced its intention to return 375m to shareholders through a share buyback programme.

Close behind was Carpetright, which reported its interim results in the morning. The group revealed a slight increase in first-half profits, but investors were more preoccupied with news of its potential takeover. The shares rose 6.4 per cent to 1080p as the company revealed that talks with the consortium headed by Lord Harris of Peckham were advanced. Harris had announced his interest in a 850m bid in October.

The profit-takers poured into Game Group yesterday, sending it spiralling over 6 per cent, before it rallied to close 3.5 per cent down at 234p. The drop came after the computer game company released "exceptional" numbers, according to KBC Peel Hunt. However, the analyst Robert Brent had a bearish view on the stock, over concerns of how the market will respond to a slowdown in momentum in the industry. "Sell early to avoid disappointment," he said.

The small-cap technology company Felix Group tanked on its return from suspension as it said it would put its trading subsidiary Felix Corporation into administration. Felix was suspended at the start of this month in the wake of a business review, and fell 52.73 per cent to 0.65p yesterday.

Inspace topped the risers on AIM as it revealed it was in talks over a potential takeover. The group, which runs local housing authority contracts for the maintenance of social housing, announced the approach from Willmott Dixon at 183p per share after the market closed on Monday.

Also driven up by a possible takeover was BBI Holdings, the diagnostics group. BBI rose 20.83 per cent to 188.5p on news it had agreed to an 83.7m offer from Inverness Medical Innovations.

It was a sweet start to life on AIM from PureCircle, which makes high intensity sweetener. The stock closed up 10 per cent on its first day at 187p.