Market Report: RSA gains as takeover rumours make a return

The revival of speculation that RSA Insurance could be the target of a takeover bid resulted in the group enjoying a late rally on the blue-chip index last night.

Market gossips were getting excited over vague talk that an unnamed company is considering a bid for the insurer of about 175p a share. It is not the first time that rumours of a potential approach have emerged, with Zurich Financial Services and Sampo some of those previously rumoured to be interested.

Traders said they expected corporate activity within the sector soon, and one noted that, after its failed £5bn attempt to buy Aviva last year, RSA had changed from "predator to prey". However, despite enjoying a rise towards the end of the day, the company only managed a modest gain of 1p to close at 134.9p.

Overall, the FTSE 100 dipped below the 6,000 point mark, sliding back 16.37 to 5,985.7. Trading was relatively quiet, with one voice on the trading floor describing the session as "dull as dishwater", which was not helped by the United States markets being closed for Martin Luther King Day.

There was, however, a surge of news released after Friday's close for investors to catch up on, including BP's announcement of its joint venture with the Russian group, Rosneft. The oil giant outperformed its peers, edging up 1.2p to 500.7p, and UBS welcomed the deal as "significantly de-risking BP's existing activities in Russia and giving the company material access to one of the most prospective areas of the offshore Arctic".

Meanwhile, Jonathan Jackson – the head of equities at Killik – stated his belief that the agreement, plus BP's recent disposal, means "the recent positive momentum of the shares will continue". However, he did warn of the likelihood of a bid approach from one of its major peers being "reduced... given that the Rosneft stake provides another hurdle to cross in addition to the potential competitive issues."

Also made public late on Friday was the decision by Smiths to dismiss a £2.45bn bid from the private equity company Amex for its medical division, prompting the industrial engineer to rise 99p to 1,381p and take the pole position on the top-tier index.

Smith & Nephew jumped up 24p to 709p as it was linked with a potential takeover yet again. According to reports, Johnson & Johnson is thinking about making a new offer of up to 800p a share.

It is not the first time J&J has been linked with a move, after it emerged last week that it reportedly had a bid rejected in December. The long-running speculation over S&N's future – which has also focused on Biomet supposedly being interested – remains ongoing, despite the company trying to stop it last Friday by denying it is involved in any merger or takeover talks. At the other end, Weir dropped 49p to 1,690p as rumours swirled that the engineering company is about to make a move for its Swiss peer, Sulzer.

On the FTSE 250, two telecoms companies found themselves being touted as possible bid targets, but the takeover spotlight only prompted a rise in one. Colt was the group which enjoyed the move up, gaining 3.2p to 143.6p, after Deutsche Bank said its "attractive valuation may attract bid interest should sector M&A pick up".

Meanwhile, Evolution Securities said it sees "a good chance that TalkTalk follows BSkyB into the clutches of an acquirer", yet the broadband company declined 1.3p to 160.7p.

Taylor Wimpey – which releases a trading update today – climbed 1.12p to 35.15, as a survey from Rightmove revealed that asking prices in the housing markets had seen a small increase.

There was a retreat of 6.3p to 341.8p for Soco International after it revealed it had plugged and abandoned a well in the Democratic Republic of Congo, with Evolution Securities' David Farrell warning that the "exploration portfolio looks thin going in to 2011". De La Rue was bumped up 10p to 788p as vague speculation emerged that it could receive an approach worth 1,000p a share. However, rumour-mongers were unclear as to whether the potential offer could come from the French group Oberthur Technologies, which had a bid rejected last December, or another company.

There was also reheated chatter that the Canadian private equity group Teachers' Capital could make another attempt to buy Moneysupermarket.com. Investors were clearly not convinced, however, and it was driven back 0.15p to 86.85p.

Bid activity was making its presence known among the small-cap companies as well, prompting Minerva forwards 13p to 100p. The rise came following the company's announcement after the bell on Friday that it has started "preliminary discussions" over a takeover with an unnamed group.

A 3 per cent year-on-year increase in production was not enough to stop UK Coal plummeting 3.25p to 52p, which also revealed in a trading statement that its debt had seen a considerable increase.