Market Report: United spurts up amid renewed takeover talk

United Utilities, the UK's largest listed water company, was the subject of takeover speculation in the City once again yesterday.

Investors piled back in, sending the share price up 20.5p in early trading, following whispers of a 880p-per-share bid from a mystery suitor.

United shares peaked at 790p at the beginning of June when it put its electricity transmission assets on the block, but have taken a hammering in the past 10 days after it was fined £8.5m by Ofwat, the market regulator, for repeatedly breaching trading rules. While infrastructure funds and private equity groups have had an insatiable appetite for listed utilities in the UK, no firm talk had emerged by the end of the day and the shares settled 10p up at 718.5p.

Another stock to benefit from takeover chat, although this time on the bidding side, was HBOS. The UK banking group rose 14p to 1003p after reports said it was through to the final round of bidding for Apollo Group, which provides housing. Apollo is the latest in a string of house-building assets targeted by HBOS. It agreed to buy McCarthy & Stone for £1.1bn last year, before sealing a £715m deal for Crest Nicholson in March, both in partnership with Sir Tom Hunter. The partnership also showed interest in Wilson Bowden.

It was a brave new world for Mondi Group, although it looked tentative on its first day of independence from Anglo American, closing down 10p at 490p. Its former parent announced plans to list the paper and packaging business last year as part of a streamlining operation and it demerged yesterday. As part of its overhaul, the UK-listed miner is also expected to sell its aggregates business Tarmac and its stake in Anglo Gold Ashanti. It traded up 64p at 3175p.

The FTSE 100 enjoyed strong early tradingoff the back of a rally in the US the previous day. One trader said the financial, mining and oil sectors had helped boost the index, whichclosed up 49.2 at 6,639.8.

One of the top-tier fallers was BG Group, which suffered on the back of a broker downgrade, shedding 7.5p to 824p. UBS changed its target from "buy" to "neutral", despite a good performance so far this year. The broker said it expected positive news flow around the company to dry up.

The latest UK group to blame the weather for lower first-half profits is Scottish & Newcastle, whose brands include Foster's and John Smiths. The brewer said poor weather would cause a market decline of 5 per cent, adding the timing of last year's World Cup would hit like-for-like sales this year. It rallied in late trading to close 0.5p up at 633p.

The software group Autonomy was top of the mid-tier risers on the back of a bullish trading update and news of an acquisition. A statement predicting revenues and profits "significantly ahead of consensus estimates" and news that it had sealed the $375m (£186m) takeover of Zantaz helped send the shares 13 per cent higher to 825p.

Shrugging off a turbulent time of late, Big Yellow Group was boosted by a broker note, rising 18p to 538.5p. JP Morgan named the storage space provider among the three top sector picks in Europe and upgraded it from "neutral" to "overweight". This reverses a steady decline at the group that has seen the stock shed almost a quarter of its value since the turn of the year.

Rumours abound that the AIM-listed Aurum Mining could be the subject of a surprise takeover bid from Kazakh Gold. Sources close to the market said the Kazakhstan company has built a significant stake but had managed to remain anonymous through trading in contracts for difference. Aurum's shares shed 3p to 98p.

Woes continue to pile up at Research Now, with its share price plummeting after a second profit warning in two months. The group slumped 45 per cent to 225p following a disappointing trading update. The company talked of profits being hit by £500,000 because of a "tragic incident" at its premises in January. It has now identified unrecorded costs of £600,000 in the first half after one of its accounting systems broke down. The group, which announces its interims on Friday, said the gross margin impact would continue into the second half.

Market makers said that the car rental company Helphire Group's price rose 24.5p to 407.5p off the back of a bear squeeze. The group has about 10 per cent of its share capital shorted.

Finally,Plantic Technologies, which makes biodegradable plastic from corn, rose 4p to 74.5p after releasing an in-line trading update and enjoying a contract win from Marks & Spencer.