Market Report: Investors bet on William Hill to dispel the gloom

The markets swung violently yesterday, as fears of the weakening global economy intensified. As the dust settled, one story that had the high rollers laying down heavy stakes was a potential bid for William Hill. The stock, and the gambling sector in general, is not new to consolidation chat, but the noise around this particular mid-tier group has intensified over the past week. On a day the FTSE 250 gave up 119 points, William Hill stormed up 9.37 per cent to 405.75p on talk of the offer from an unnamed suitor.

The main focus for the gossips in the sector had been Rank Group, which plummeted to 15-year lows in November after a profit warning. It was said to have interested both William Hill and Ladbrokes, but no concrete proposals emerged.

The FTSE 100 opened up 104.8 points after the Asian markets rallied but slumped on bearish sentiment from the UK central bank. Merv-yn King, the Governor of the Bank of England, said the market was facing its toughest challenges for a decade.

Despite a brief rally, the bears had gripped the market by the throat in the afternoon and it closed 130.8 points lower at 5,609.3. The top tier was dragged lower by the oil majors, with Royal Dutch Shell among the worst performers. It retreated 5.85 per cent to 1,690p as the price of oil fell on fears over the global economy.

Vedanta Resources also suffered after it announced profits had fallen at its Hindustan Zinc business. It closed down 3.72 per cent at 1,605p.

A note from Evolution Securities knocked Sage Group 5.16 per cent to 216p. The broker said Sage had outperformed the wider UK IT sector recently "but it is heavily exposed to the part of the US economy that looks particularly vulnerable to a slowdown". The note, titled "death of a thousand cuts", slapped a "sell" rating on Sage.

Prudential topped the risers in the morning, on reports in China that Ping An Insurance was eyeing a stake in the UK business. Analysts couldn't agree over the story. Bernstein Research said the move would not be a controversial one, but Collins Stewart dismissed it, saying the stock rebounded after being oversold. It closed up 1.21 per cent at 626p.

One company to suffer a steep decline in value this year is FirstGroup. The transport group's shares hit record highs of 815p on New Year's Eve, only to spiral over 27 per cent in 2008. It rallied 3.25 per cent to 650.5p yesterday after Goldman Sachs removed its "conviction sell" rating.

HSBC was the winner from a banking sector review by ABN Amro. The stock rose 2 per cent to 755p after the Dutch broker upped its rating to "hold" from "sell", citing its balance sheet strength, diversification and "growing expectation of underperforming asset disposals".

ABN remained bearish on the wider sector and downgraded three banks to "sell". The worst hit was HBOS, down 27p to 633p. The banks were not helped by the extraordinary, and unlikely, rumours of a €40bn writedown by the French group Société Gé*érale. In France, the group's share price rallied off lows, suggesting the rumours had little foundation.

Just behind William Hill on the second tier was Catlin Group, 6.42 per cent higher to 348p. The rise was sparked by Goldman Sachs, which said the stock had been oversold, losing 35 per cent of its value since November.

On the slide was International Ferro Metals after it disappointed the market with its first-half production figures. The group's ferrochrome production was hit by an overhaul of its electrode pressure rings and interruptions to its electricity supply. Despite a confident outlook, the stock fell 10.55 per cent to 89p.

The small cap index finished 29.9 points down at 3,056.9, with Thomson Intermedia the lowest. The data group spiralled down 39 per cent to 34p as it announced that its full-year numbers would not meet market expectations. The shares also stumbled on news that its financial director had resigned. The publishing group Charterhouse Communications fell 33.3 per cent to 0.5p on a proftis warning.

On the plus side, the car parts group Antonov was motoring, storming up 44 per cent to 34.5p. The company announced it was making "considerable pro-gress" with its operations in China. Antonov is working on a joint venture with local group Loncin, and yesterday announced a funding facility of €10m to finance its contribution.

The mobile game company Superscape Group was certainly looking upwardly mobile after agreeing a takeover proposal from Glu Mobile. The deal, worth £18.3m, sent the shares up 24.5 per cent to 9.65p.

Another stock to benefit from merger talks was Dawson International, which closed up 9 per cent to 3p. The cashmere group was looking smart as it revealed a takeover approach from rival Lingwu Zhongyin Cashmere Company.