Market Report: Bid gossip pushes Micro Focus towards summit

With market gossips getting animated over speculation the software company could be a takeover target, Micro Focus finished at the top of the mid-tier index last night after shooting up more than 9 per cent.

The group rose 27p to 311.6p as vague chatter did the rounds that a possible approach could be made worth between 450p- and 500p-a-share. Both IBM – which has been linked before with Micro Focus – and the German company SAP were named as potential bidders, while traders were also talking about an unnamed third group.

Last month, Micro Focus lost more than 25 per cent of its price after issuing a profit warning, prompting analysts to speculate that the dramatic fall made it more likely to attract an approach.

Overall, as the FTSE 100 dived as low as 5,865.92 points in early trading, it looked as if it was set to take another severe knock because of fears over the turmoil in the Middle East and North Africa. However, impressive jobs figures from the US improved sentiment somewhat, though the blue-chip index was still 20.87 points lower at 5,914.89 at the bell.

One of the groups looking brighter was Cairn Energy, thanks to rising hopes that the Indian government will approve the sale of its controlling stake in Cairn India. The oil and gas explorer was lifted 7.9p to 438.4p following reports from India that the country's oil ministry is set to give the deal with Vedanta Resources – 50p higher at 2,419p – the green light without any major demands being made, though analysts warned there were no guarantees yet.

There were some modest gains among the water utilities, with Severn Trent and United Utilities moving forwards 6p to 1,474p and 5.5p to 592p respectively, as Goldman Sachs predicted that a wave of takeover speculation will hit the sector. The broker's analyst Fred Barasi said E.ON's £4.2bn sale of its Central Networks electricity distribution business to PPL means "disappointed bidders may seek exposure to similar themes [UK inflation and regulation] through the water sector".

The retailers took yet another hit as Morgan Stanley warned that the sector's current problems could "get worse rapidly". Its analysts said a rise ininterest rates would have a much more immediate effect on retail sales than previous increases, given fewer mortgage holders are on fixed rates. Stating they were "most bearish on the electrical retailers", Kesa Electricals eased back 1.1p to 124.5p and Dixons was knocked back 0.75p to 18.01p.

It was a busy day for results, withinvestors' reactions to updates driving large moves in both directions. Standard Chartered was one winner,advancing 70p to 1,688p as it revealed a 20 per cent rise in profits and predicted that its revenue will grow in 2011 by at least 10 per cent. A number of its peers also finished in the blue, including Barclays Bank – up 1.15p to 314.4p – and Lloyds Banking Group – up 0.98p to 62.73p – with the latter helped by a "buy" note from Bank of America Merrill Lynch.

Whitbread fell 90p to 1,644p as it said sales growth at its budget hotel chain Premier Inn in the last quarter had dropped to 5.1 per cent from 8.7 per cent over the previous three months. The group also announced it was spending £59.5m on the Coffee Nation chain, and would introduce a new CostaExpress brand as a result.

It was joined near the foot of the index by Admiral, 53p behind at 1,655p,despite the insurer's final results meeting expectations.

The headline update on the FTSE 250 came from ITV, and the broadcaster – which revealed strong annual numbers – said it was planning to reintroduce its dividend this year. Lifted 7.95p to 93.45p, it is currently in a greatposition to be promoted to the FTSE 100 when the latest quarterly review is made next week.

Elsewhere on the second line, BBA Aviation's announcement alongside its final results that it is funding two acquisitions with a share placing meant it dropped back 12.8p to 206p, while Carillion slumped 16.6p to 357.4p as the building group warned that "market conditions will remain difficult in 2011".

Down among the small-cap companies, PayPoint was breathing a lot easier after Camelot was told its National Lottery terminals could not be used to pay bills and buy mobile phone credit. With the removal of this potential competition, the electronic payments group rocketed up more than 18 per cent, climbing 62p to 402p.

Meanwhile, 888 increased 4p to 46p as vague speculation – played down by traders – emerged that Ladbrokes could make an offer worth 72p a pop for the gambling group; the companies confirmed last December that preliminary takeover discussions were taking place.

On the Alternative Investment Market, penny stock Hot Tuna saw a massive jump of more than 56 per cent – albeit meaning it finished only 0.09p higher at 0.24p – as the surfing apparel retailer revealed Churchill Mining founder Melissa Sturgess as its new non-executive chairman.