Market Report: Dividend whispers put Admiral into overdrive

Rumours its investors may be in for an early Christmas present helped Admiral sail to the top of the blue-chip index last night. The motor insurer revved up following vague whispers claiming it could be about to unveil a rather large special dividend, with mutterings suggesting it may be worth as much as 100p.

The talk saw the group jump as high as 869p during trading before it ended up closing 32p ahead at 847.5p. However, City voices tried to put the brakes on the speculation, saying such a sizeable sum would prove a stretch.

Traders were also playing down the tale, with one claiming Admiral was being supported by the head of the Association of British Insurers, Otto Thoresen, highlighting at a conference the setting-up next year of a City of London police unit to tackle insurance fraud.

Despite the advance, Admiral remains nearly 30 per cent lower than before the release of its interim management statement a fortnight ago in which it unveiled a profits warning thanks to a recent increase in large claims.

For much of the session it looked as if the FTSE 100 was finally going to enjoy a bounce, but a late slump saw it decline 15.78 points to 5,206.82, finishing in the red for the seventh consecutive session.

Late rumours Belgium could be the next country to have its credit rating downgraded did not help, neither did the US economy's growth estimate for the third-quarter being revised down to 2 per cent from 2.5 per cent.

The partially state-owned banks were rather short of friends, with Royal Bank of Scotland driven back 1.14p to 18.42p while Lloyds slumped 1.03p to 22.39p. The latter had its target price cut by Morgan Stanley to 27p from 35p as the broker claimed investors were understimating "the impact on revenues at [the bank] of declining loan volumes".

The gossips decided to turn their attention yet again to Reckitt Benckiser, helping the Cillit Bang manufacturer shift up 71p to 3,171p. Frequently the subject of rumours it could become a bid target, the latest revival failed to mention any names, although Unilever (up 35p to 2,055p) and Procter & Gamble have been among those linked in the past.

There were no prizes for spotting the day's most dramatic move, as Thomas Cook had its share price destroyed after saying it was back in discussions with its banks despite securing new funding barely a month ago.

As a result, the troubled tour operator – which had already retreated nearly 80 per cent this year alone – dropped a further 75.19 per cent to 10.2p.

With the group also warning it had seen a slump in trading, its fellow FTSE 250 peer Tui Travel was not helped, although its dip of 13.9p to 136.7p was seen by dealers as rather resilient considering the circumstances.

There was further bad news for travel industry stocks after the pilots and crew union of International Consolidated Airlines' Iberia said they would soon vote on whether to go on strike. In response the British Airways-owner slipped 7.2p to 132p, leaving it close to the foot of the benchmark index.

Misys was dealt a blow by Numis Securities' David Toms, who said it was looking less and less likely another bidder would emerge for the software company in the wake of the US group FIS abandoning its approach back in August.

Downgrading his advice to "reduce" from "hold", the analyst said he was worried about the outlook for Misys, which was knocked back 3.7p to 273.4p, and that he was therefore "less confident about the prospects for [it] to sell part or all of its business".

There was yet more woe on the High Street, where Supergroup – which was hit last week by claims the popularity of its Superdry clothing brand is on the wane – jumped down 48.8p to 471.2p, the first time the company has fallen below last year's float price of 500p a share.

Down on the Alternative Investment Market, Kalahari Minerals charged up 7.25p to 218p amid the reheating of vague speculation the miner could be close to agreeing to an approach from China Guangdong Nuclear Power, with the two announcing the restart of takeover talks back in October.

Good news for drivers was not so welcome for Nationwide Accident Repair Services, after the car repair group released a profits warning thanks to a drop in insurance claims. The company reversed 19.5p, or 21.67 per cent, to 70.5p, blaming the recent unseasonably warm weather for exacerbating the trend.

Back on the main market, Homeserve slipped 24.4p to 225.1p as the company – which describes itself as the "fifth emergency service" – admitted its potential mis-selling scandal would result in as many as 240,000 customers jumping ship.