Market Report: Woolworths gets swept up in takeover talk

Rumours continue to sweep around the supermarket sector, as the latest chat linked Morrisons Supermarkets with a bid for the beleaguered retailer Woolworths.

Woolies closed up 9.33 per cent at 20.5p on the news, while Morrisons closed down 1p at 286.5p.

Traders had their doubts over the accuracy of the claims, with one saying "they would be crucified if they bought Woolworths". He added that Morrisons could be trying to set up rival sites to the successful smaller stores brought in by Tesco and Sainsbury.

The speculation follows a report from Kaupthing earlier this week that floated the idea that Woolworths could be a target for Morrisons, Asda or Somerfield.

There was also bid speculation from an unknown suitor all day in Schroders, sending the shares up 5.71 per cent to 1,500p.

Elsewhere in the financials, top of the risers was Northern Rock. It rose 43 per cent at lunchtime on reports that Jon Wood's hedge fund SRM Global had taken a 4 per cent stake. The market also continued to swirl with rumours of fresh bid approaches, although one trader said the rises were due to a bear squeeze. The shares retreated at the end of the day, but closed up a third at 273.5p.

Shares in British Airways took off 4.59 per cent to 439p as investors bought in ahead of an analyst meeting at the new terminal five today. Traders said some positive news is expected, while the stock was further supported as Axa revealed it had bought a 5 per cent stake at the end of the day.

The miners looked strong after a bullish note from Credit Suisse. The Swiss broker expects a "major rally" in the stocks, with the catalyst likely to be a breakout in copper prices above the $4 per pound mark.

Xstrata was up 4.41 per cent to 3,455p, while Kazakhmys strengthened 4.17 per cent to 1,524p.

The oil sector was also in focus. BP is expected to unveil the first step in it restructuring plan, according to talk in the market and after a rises in the morning closed down 0.5p at 580p. The oil giant also announced its $3.7bn (£1.8bn) Atlantis joint venture with BHP Billiton had started flowing oil, and that it had sold its 47 per cent stake in Samsung Petrochemical for $70m. Sector rival Shell fell 1p to 1,976, after talk it could lower guidance for the year.

Experian Group spiralled to the bottom of the blue chips, down 7 per cent to 505p. The credit reference group said full year profits would be in line, but a note from Citigroup titled "Contagion bites" sent the stock lower over fears for its US operations. Citi said cyclical risk is building and with the credit markets deteriorating, the chances of a takeover bid, rumoured last week, are unlikely.

Another stock to suffer from a broker downgrade was HBOS.

The US group reduced its rating to "underweight" from "overweight," saying the UK mortgage sector would be hit by lower volumes next year.

The markets struggled in the morning, dropping almost 28 points, as traders were cautious following the previous day's gains. It threw off the shackles by the end, with the FTSE 100 closing up 17.6 at 6,633.

On the second tier, UK Coal was up 3.57 per cent to 522.5p after it landed a contract to supply almost 6 million tonnes of coal to the German power giant E.On over the next five years. Traders were scratching their heads over Colt Telecom, which came from nowhere to end the day the best mid-cap performer, up 7.42 per cent at 181p.

Other interesting buying was noted in Hays possibly relating to potential interest in the group. The shares have rallied off year lows at the end of last month, but traders said they were still undervalued, and added a company such as Adecco could be interested.

Go-Ahead Group was also motoring, rising 5.1 per cent to close at 2,555p after Deutsche Bank upped its rating to "buy".

Gaming group Ladbrokes was down as talk swept the market that UBS had placed 16.7 million shares in the group at 425p each. It closed down 1.96 per cent at 425p.

It will be watching developments at Alphameric with interest. The IT services group for bookmakers, which owns Turf TV, announced it had been approached relating to a potential takeover. The stock, which hit a wall after warning on profits last month, soared 75 per cent to 28p.

Another company that could be facing a takeover is Oxford BioMedica, as reports did the rounds of potential interest from Sanofi Aventis. Oxford, which currently has a joint venture with Sanofi, closed up 1.5p at 36p.

Magners brewer C&C Group was looking flat after profits fell 33 per cent in the first half. The group, which saw sales hit by the wet summer and increased competition, announced it was to restructure. It closed down 12.87 per cent at 5.24p.