Market Report: Woolies plunges on fears of collapse in talks

The battle for Woolworths hit a critical stage at the end of the week, and the market was predicting the worst yesterday. The DVD to pick 'n' mix store has been in talks to sell its retail arm to the restructuring group Hilco for £1, but talk swept the market in the afternoon that the negotiations had collapsed.

It served to spook the market as Woolies plunged 31.9 per cent to 1.43p to become the worst performer on the FTSE All Share, with Altium cutting its recommendation to a "sell" saying it wouldn't find a buyer. This followed reports in the morning that the group's lenders were refusing to give their consent to the deal.

The day started slowly – one market maker complained at lunchtime he hadn't been called in half-an-hour – but the FTSE 100 gave up its gains after Wall Street opened, as Citigroup continued to take a hammering. The blue-chip index closed 2.4 per cent down at 3,780.96.

The miners picked up the pieces after a huge sell-off the previous day, as the price of metals stabilised. Vedanta Resources was the pick with a 16.05 per cent bump to 450p. Thursday's wooden-spoon winner was the life insurer Aviva, and it rebounded with gusto, up more than 11 per cent as investors thought the sell-off might have been a little overdone. It weakened with the market, closing 1.5p up at 294.25p.

The oil equipment and services company John Wood was up 3.83 per cent to 190p following support from Goldman Sachs. The US broker reversed its recommendation from "sell" to "buy", saying Wood's maintenance business put it in a better position than many of its peers.

After a strong performance from some of its rivals the previous day, it was Barclays' turn to enjoy a bounce yesterday. The group rose 4.31 per cent to 133.2p after Legal & General Investment Management said it would support the group's £7bn fundraising plan at the vote on Monday.

Among the losers was the travel group Thomas Cook. The company slumped almost 7.4 per cent to 127p on fears over consumer spending and reports that its majority shareholder Arcandor was in financial trouble. The German group released a trading update this week predicting it was facing a tough year. Lowest on the day was AstraZeneca as investors looked to bank profits from a previously defensive sector. It closed 8.7 per cent down to 2245p.

There was some disagreement among the brokers over National Grid. While Citigroup was waving the banner of support, both Pali International and HSBC turned on it. Pali reduced its target price to 719p from 795p, while HSBC cut its recommendation from "overweight" to "neutral". The latter said rising debt costs hit Thursday's interims and it could consider abandoning its share buyback programme. The "no's" had it, and the group closed 7.21 per cent down at 631p.

David Montgomery's media group Mecom dropped from top to bottom of the second string. The company had been the focus of bid speculation from the German publishing house Axel Springer this week. The continued silence sent it down 17.39 per cent to 1.9p.

Burberry wasn't looking so flash either as UBS took the axe to its target price. The Swiss broker smacked a "short-term sell" rating on the clothing group and cut the price from 300p to 180p. Burberry ended in a heap, 8.57 per cent lower at 160p.

At the other end DSG International flew more than 40 per cent, with some traders kicking themselves that they hadn't picked any up when it fell to all-time lows this week. The jump was brought on by a note from Credit Suisse, although one market maker said the rises could be attributed to short covering.

St Modwen Properties was up for the second day in a row. The group climbed 9.37 per cent to 99.25p after Numis Securities initiated coverage with a buy.

Another riser was the budget airline easyJet. Issues between Sir Stelios and the board "cast a shadow across the stock", according to Société Générale, yet the French broker upped its rating to "hold". It said the 26 per cent fall the morning the dispute went public fully reflected the issues. EasyJet closed up 10.23 per cent to 256p.

On AIM, Renewable Power was certainly feeling the force, jumping by half after revealing it had received an approach from an unnamed suitor. The stock rose 52.27 per cent to 16.27p.

Good news for African Minerals, which jumped 22.22 per cent to close at 22p. It announced London Mining had withdrawn its application for an injunction against it, relating to iron ore assets in Sierra Leone.

Not such good news for Entelos as it warned on full-year profits, with the shares closing down 40 per cent at 3p. The contract research company blamed the credit crunch.