Market Report: BG Group buoyed by talk of Chinese suitor

The oil majors were looking especially slick, on a second consecutive day of gains for the market. Top of the leaderboard at the end of the day was BG Group, driven by the rise in oil prices and backing from Dresdner Kleinwort.

The broker upgraded BG to a "buy" rating, saying the current share price offers a 14 per cent upside. It said: "The underperformance has left BG at levels that make a re-emergence of the takeover theme more credible." Speculation had linked the oil and gas giant with a bid by a Chinese state fund, which took a 0.46 per cent share in the group in July.

The note followed news from the US energy department, which reported a decline in petrol and oil inventories, sending the price soaring. BG closed 4.27 per cent up at 782p. Royal Dutch Shell was also among the top risers, closing up 2.26 per cent at 1900p.

The FTSE 100 stormed up after a strong overnight performance on Wall Street. The index closed 79.8 points higher at 6212 as confidence began to return. One trader said: "No one know which way this is going to go. Some are thinking 'why buy now when I can probably get it cheaper tomorrow?'"

Mining giant Xstrata was up 68p to 2880p as it continued its share buyback programme. The strategy has been conducted in an unorthodox fashion since the beginning of August. Batiss Investments, an independent fund whose guidelines are set out by the Anglo Swiss company, has built its stake to 7.71 per cent with yesterday's purchases. Its shares are not cancelled, the group says it offers them more flexibility, and could be used to fund further acquisitions.

At the other end of the scale, DSG International, formerly known as Dixons, was the worst performer. DSG dropped 1.59 per cent to 154.8p after it warned that margins at flagship computer shop PC World had been hit by lower-than expected demand for Vista products. Poor old Barclays was down again as rumours swept the market that it had called a meeting this Saturday to discuss its subprime losses. One trader said: "Financial firms do meet on Saturday, but it's not normally for good news." It closed down 2.5p at 597.5p.

On the second tier, investors piled into Emap, after it updated the market on the strategic review launched at the end of July. It said it had received interest for all parts of the business and will update investors further at its interims in November. Seymour Pierce said: "The statement should go some way to allaying investor fears that a break-up of the group or demerger might leave an unattractive rump." It closed up 48.5p at 885p.

Backing from UBS drove Detica Group up 7p to 295p. The Swiss broker upped its rating to "buy" from "neutral", saying the business and IT consultancy's 11.3 per cent underperformance of the FTSE 250 was unwarranted. It sees a 34 per cent upside in the share price.

Several companies in the mid tier were hit by adverse reaction to their interims. The worst performer of the day was Hunting, which failed to beat expectations. The oil services company spiralled 7.28 per cent to 700p, after admitting it was hit by a weakness in the dollar. Plastic and fibre products supplier Filtrona wasn't far behind, suffering a bout of profit taking as its interims beat expectations.

Outside the FTSE 350, the big story for traders was at the "horror show" that was Central African Mining & Exploration. The stock was down 24 per cent at one stage after it lost a license in the Democratic Republic of Congo, and threatens to derail its bid for Katanga Mining, launched on Wednesday. Traders were seeing a huge turnover in the stock, with more than 15 million traded by mid-morning. It ended the day down 16.75 per cent at 39.75p.

Elsewhere among the small caps, it was one-way traffic at 2waytraffic. Traders were selling into the interactive entertainment group after a profit warning, and it closed as the worst performer on the growth market. Its shares fell 20.95 per cent to close at 100p after it admitted a dispute with a Belgian partner and technical issues with partners in the US.

Black Rock Oil & Gas finally reported the long awaited results of its exploration in Colombia. The market was largely unmoved by the "fair to good" results, however. One trader said: "They're not as good as we had expected. The management has put its best spin on the results, but we've definitely seen sellers today."

One of the top risers on AIM was Intercede Group. The identity management IT company rose 12.5 per cent to 40.5p after it signed a license with an "unnamed international electronics and systems group".

Carter & Carter continues its long hard slog to recoup the year's losses. It closed up 4.5 per cent to 123.5p after buying a training centre in Northern Ireland for almost £1m.