Market Report: BSkyB climbs on talk of Murdoch merger plan

The corporate activity rumour mill has gone quiet in the past few weeks. This is partly because there are few stocks left in the top flight that have not been talked of as bid targets, and also because commodity and currency issues have taken over as the key issues for traders.

One stock never likely to feature in anyone's takeover target list is BSkyB, the satellite broadcaster. That is, of course, unless a bid happens to be plotted by Rupert Murdoch, the company's founder and chief executive of News Corp, which owns 38 per cent of BSkyB's shares. The chat in the market was Mr Murdoch is plotting to make an offer for the outstanding BSkyB shares and to merge the two. BSkyB shares rallied strongly on the rumours, climbing 31p to 559.5p in mid-afternoon trade before profit-taking saw themclose at 545.5p, a rise of 17p - the stock's best day of the year.

However, the buyout chat did not convince everyone. Leigh Webb, an analyst at the broker Panmure Gordon, said: "I would be very surprised if there was any truth to this rumour. We are yet to see how much BSkyB's entrance into the home broadband market is going to cost and if it will emerge as one of the winners in the 'triple play' of broadband, television and voice provision. On top of that the chances of anyone else bidding for BSkyB are extremely low."

The merger of Boots and Alliance UniChem continues to attract admirers. Deutsche Bank became the latest heavyweight broker to throw its weight behind what will be the UK's largest pharmacy retailer, raising its target price for the former to 850p from 600p, saying the merger "makes strategic and financial sense". But Alliance was the main beneficiary of the note, its shares adding 24.5p to 933p while Boots added 12p to close at 734.5p.

After two days of heavy selling, calm returned to London trading, although the FTSE 100 just closed in positive territory, adding 4.9 to 5846.2. Commodity stocks remained unloved, with Xstrata again proving itself not to be a stock for the faint-hearted, falling another 107p to 2,101p.

In spite of the more bullish feeling around the market, there was still room for the odd disaster. Carnival, the cruise ship operator, disappointed traders by lowering its guidance for 2006 results. It blamed higher-than-expected fuel costs as it said earnings for the current year would show little improvement over numbers for 2005. The shares closed at 2,326p, a fall of 326p.

Elsewhere in the FTSE 100, Man Group, the hedge fund manager and commodities trading group, came under more selling pressure as traders continued to take profits after weaker global equity markets. The shares had risen more than 40 per cent since January, making them among the best performers in the FTSE 100, but a third consecutive session of losses saw them close 88p weaker at 2,312p.

Strong first-quarter results from the rival fund manager Schroders, showing a 41 per cent increase in pre-tax profits, were not enough to prevent more selling in the fund management sector, as shares in the 200-year-old City institution fell 34p to 1,073p. Second-line fund managers performed better, with F&C Asset Management 5.5p firmer at 209p and Liontrust Asset Management 9.25p stronger at 387.25p.

Slough Estates became the latest property group to confirm it will seek to convert to Real Estate Investment Trust status, although unlike its rivals, the share price failed to rally on the news, falling 15.5p to 603p. Traders said the statement told them little they did not already know, and a couple of large sellers, possibly switching into Land Securities before full-year numbers out today, contributed to the slide. Land Securities fared better in a poor day for the property sector, dropping 1p to 1,830p, with traders expecting a strong set of results.

The AIM-listed biotech Alizyme jumped 16.25p to 153.5p after the broker Evolution Securities highlighted the group as a possible takeover target in light of the £702m bid for Cambridge Antibody Technology from the pharmaceutical giant AstraZeneca.

Equator Group, the cash shell that announced a reverse takeover by HandMade Films on Monday, surged more than 70 per cent as newly appointed advisor, Cannacord Adams, began making a market in the shares and immediately called them higher. Equator is raising £10m through a placing at 32p, and the shares closed 13p higher at 32.5p on thin volume.

There was a disappointing start to trade for Acertec, the engineered steel group, after a placing to raise £57m through the broker Collins Stewart Tullett. Despite more than 1.5 million shares changing hands and the placing being eight times subscribed, the shares made little headway and closed at 147p, 1p worse than the placing price.