The week that was: Market froths at prospect of Domecq-Pernod nuptials

The talk was all takeover last week as gossip, speculation and even the odd deal dominated markets.

Drinks group Allied Domecq was one of the biggest names involved after French rival Pernod Ricard hired JP Morgan and Morgan Stanley to weigh up potential acquisitions. Speculation that the two will eventually agree a tie-up has been around for a while, but investors took Pernod's move as a more definite sign and shares in Allied Domecq leapt.

Retail was also a central player. Shares in Woolworths spiked after private equity firm Apax Partners confirmed it was considering a bid. However, by the end of the week the shares had eased after analysts pointed out that the 22 per cent rise was excessive - and, indeed, that no formal approach had actually been made.

One retailer that is up for sale is Allders. Administrator Kroll received 72 expressions of interest and 36 bids for both the entire business and parts of the department store chain. The expected purchaser, the private equity firm Alchemy, dropped its bid on Friday.

Actual deals included broker Teather & Greenwood agreeing to end its independence and be bought by the Icelandic bank Landsbanki Islands for pounds 42.8m, while another broker, Dur- lacher, merged with rival Panmure Gordon.

But struggling to get off the ground was Xstrata's bid for WMC Resources. It upped its offer for the mining group to A$8.4bn (pounds 3.5bn) but WMC refused to back the bid and said it would seek proposals from other companies.

The biggest deals were Stateside. SBC Communications agreed to buy AT&T in a $16bn (pounds 8.5bn) deal, while fellow phone firm Qwest International was reported to be considering a $6.3bn approach for former WorldCom business MCI.

Beer groups Molson and Adolph Coors agreed to a $3.4bn merger but a bigger deal involved banking giant Citigroup, which agreed to sell its Travelers life insurance business to MetLife in an $11.5bn move.

In other, non-deal-related, news, profits at pay-TV group BSkyB jumped on higher subscriber numbers, while mining giant Rio Tinto showed the benefits of surging commodity prices with healthy profits and a $1.5bn share buyback programme. But British Airways felt the commodity backlash as profits dipped on higher oil costs.

Legal news saw insurance giant Marsh & McLennan agree to pay $850m to settle accusations that it rigged bids and took kickbacks, while tobacco companies such as Altria and British American Tobacco won a significant round in their latest battle with US authorities. An appeals court rejected the government's bid, based on accusations of racketeering, to force them to pay $280bn.

And in economic news, US interest rates rose but the European Central Bank erred on the side of caution. It left rates on hold, citing concerns about unemployment - a worry proved well founded when Deutsche Bank revealed it was axing a total of 6,400 jobs.