Market Report: Takeover hopes dim for FTSE 100 companies

Fading takeover hopes led to both Smith & Nephew and Capital Shopping Centres missing out yesterday from the blue-chip index's strong rally.

S&N was the top riser on Monday following reports that it had rejected a bid from Johnson & Johnson in December, prompting speculation that an improved offer could soon be forthcoming.

Yet last night the replacement knee and hip manufacturer took the wooden spoon on the top-tier index after declining 42p to close on 670p, as investors lost confidence that it will receive a fresh approach.

Analysts were certainly not positive, with Investec's Sebastien Jantet saying "the lack of any comments from either S&N or J&J... suggests that a bid is unlikely in the short term".

Meanwhile, Jeremy Batstone-Carr, the head of research at Charles Stanley, warned that "any deal involving the two companies would face significant regulatory hurdles, both in the US and in Europe", and added that he increasingly believes "no formal approach has been made".

Capital Shopping Centres was also struggling, retreating 10.8p to 381.7p, as any remaining possibility of it being bought by the US group Simon Property was extinguished. Simon yesterday announced that it had given up in its attempts to buy the shopping centre-owner, blaming CSC's board for refusing "to share any due diligence information".

Simon had previously made an indicative bid worth 425p-a-share, which CSC attacked while claiming that its net asset value could be as high as 625p a pop.

Overall, the FTSE 100 managed to arrest its recent three-day slump and climb 57.73 points to 6,014.03, helped by Japan's announcement that it is going to buy eurozone bonds.

The news certainly helped the banks, with Barclays – whose boss Bob Diamond was appearing in front of the Treasury Committee – the best performer. It was bumped up 15.3p to 292p as Exane BNP Paribas' Ian Gordon picked it as his "preferred play".

The analyst predicted that Barclays would produce "sustained outperformance through a challenging 2011, free of the overhang from UK government ownership that may ultimately constrain performance at Lloyds Banking Group and Royal Bank of Scotland".

Barclays also found favour with Société Générale, which recommended it and Lloyds (up 0.99p to 66.18p), along with the French bank Crédit Agricole, in a bullish note on the sector. Meanwhile, RBS shrugged off a £2.8m fine from the Financial Services Authority over customer complaints to book gains of 0.76p, finishing at 40.26p, while HSBC surged forwards 16.3p to 688.7p.

Investors were speculating yet again that Arm Holdings may become a takeover target, after the US TV personality Jim Cramer told viewers of his CNBC Mad Money show that the chip-maker could receive an offer. Although by no means the first time the Cambridge-based group has been the subject of bid talk, it still shot up 32.5p to 497.5p to take pole position.

Its mid-tier peer CSR made an even bigger gain, as it rocketed up 57p to 413p, following the resolution of a legal dispute with the US group Broadcom. The British company will pay $67.5m (£43m) to temporarily end the row over technology patents, meaning that neither can sue the other until 2016.

Brokers welcomed the news, with Espirito Santo Investment Bank's analysts saying that CSR's estimated earnings before interest and tax, and earnings per share should be upgraded by about 10 per cent as a result.

Close behind it on the FTSE 250 was Howden Joinery, which advanced 10.6p to 116.1p after a trading update. The British kitchen supplier predicted that its pre-tax profits for the full-year would surpass forecasts, thanks to a sales increase from its depots.

Its positivity spread to others in the builders' merchant sector, with Travis Perkins closing 57p better off on 1,094p. It also helped plumbing and heating products group Wolseley on the top-tier index rise 122p to 2,179p, and Citigroup said its stock could reach 4,500p in three years "with help from the macro environment and a more aggressive use of the balance sheet". Rumours of a potential takeover approach did little to move Meggitt, as it edged up 4.9p to 380.9p, despite market gossips speculating that it could be about to receive a bid worth 550p a share.

One confirmed acquisition was Ashtead's $38m deal to buy the US company Empire Holdings, and the market reacted well with the British equipment hire company getting bumped up 9.8p to 176.2p.

On the Alternative Investment Market, a large resource upgrade at a nickel project in Tanzania provoked African Eagle Resources to soar 1.25p higher to 13.5p.

Elsewhere, the small-cap outsourcing company Interserve was 34.5p stronger at the bell at 268.5p after it predicted a "stable" 2011.