Market Report: BAA flies high on rumours of Ferrovial bid

After three weeks of talks it looks as if the bid for BAA from Ferrovial may be imminent, with traders building positions in the expectation that the bid will come at about 920p. Many traders believe that at that price the deal will attract enough support to complete.

Rumours have linked Ferrovial with Macquarie Bank, the Australian infrastructure investor originally thought to have been cold-shouldered out of the deal. Reports suggesting that Ferrovial is in the final stages of putting its consortium together sent shares in BAA up 28p to 835.5p, close to an all-time high.

The FTSE 100 was driven higher early in the day on relatively light volume, as a rash of old take over stories were drummed up by traders hoping to give the market a spark. The usual suspects were wheeled out; ITV, up 2p at 110.5p, Cable & Wireless, 2.25p better at 107.5p, and Matalan, up 2.25p to 190.75p.

Although most traders were sceptical about a bid for either of the three in the immediate future, there was enough interest to drive the market slightly higher. The gauge of leading shares closed up 25.7 at 5858.7.

The real spur behind the market's rally was Vodafone. After a bad week for the world's largest mobile phone network operator, its shares rallied 9.5p to 121.5p, the best performer in the main London index as nearly 1.5 billion shares changed hands.

News that the company is deep in talks with Softbank, the Japanese broadband and internet service provider, over its Japanese arm sent Vodafone shares higher, as the market welcomed a decisive move from the group's under-fire chief executive, Arun Sarin, to try to stop the rot.

Will Armitage, of IG Index, said Vodafone's rally was responsible for all of the FTSE 100's gains. "This sort of rise in Vodafone counts for 25 points in the index - almost the exact amount that the index is up," he said. "The Dow Jones futures were looking weak after Intel downgraded its numbers, indicating a poor afternoon in London, but Vodafone has come to the rescue."

BT Group was also up after reports that a private-equity firm has been running the rule over the former national telecoms monopoly. Sources were quick to point out that such a deal would require at least £30bn once BT's £12bn-plus debt is taken into account, and that is before any premium is priced in.

Traders seem happy to believe anything on a Friday, and BT's shares rose sharply, adding 12.5p, or 6 per cent, at 220.5p, making it the second best performer in the FTSE 100.

Among the top performers in the large-caps sector was PartyGaming, 6.5p better at 129p, as the broker Dresdner Kleinwort Wasserstein said shares in the online gaming group "are too cheap".

The company has been up and down like a yo-yo since coming to the market in June, probably one of the main reasons traders like the stock. Recent volatility has centred on the resignation of the chief executive and talk of litigation against online gambling in the US.

But it was a miserable Friday in the pubs and bars sector after downbeat comments from JD Wetherspoon about the smoking ban, due to take effect in June 2007, despite the company reporting an increase in pre-tax profits. Shares in Wetherspoon fell 15.5p to at 342p, dragging its rival Greene King down 35.5p to 706.5p, Enterprise Inns down 14.5p to 887p, and Mitchells & Butler 5.5p lower at 395.25p.

Stamp collecting may be considered a hobby by most but for Stanley Gibbons, the 150-year-old philately business, it is proving to be ever-more lucrative as the internet feeds global trading. Pre-tax 2005 profits were well ahead of expectations at £2.82m, and the broker Seymour Pierce urged its clients to snap up shares in the business, whichrose 21.75p to 119.75p.

There was a good debut for Betex, a South-east Asian lottery and gaming company. The broker Cenkos Securities, raising £12.5m in the process, placed Betex shares at 34p with institutional investors. There was solid demand for the stock all day, driving the group's shares to close 22 per cent higher at 41.5p.

The star performer in the London market was Carpathian Resources, which surged 96 per cent to 5.62p after the company said its Ja3a well in the Czech Republic holds 250 per cent more gas than was previously indicated. The company expects to be able to deliver 80 per cent of the field.

Finally, traders were also watching Cambrian Mining as it continued to erode the large discount that has dogged its shares in recent months. The broker Killik & Co reckons the discount on the stock has narrowed from 34 per cent to 18.5 per cent in the past month - but that Cambrian Mining shares have further to go. Its stock added 11p to close at 143p.