Market Report: Compass rumours point to a surprise ahead

Compass Group, the world's largest contract caterer, has had a difficult time over the past few years. The stock still trades at a discount to its March 2004 value, since when the blue chip index has risen more than 24 per cent. However, the rumours are that senior management has had enough and will offer shareholders 370p to take the company private.

Although the stock has rallied well over the past two years it still lags behind the rest of the market and traders are speculating that more value could be made of the company if it were in private hands. Trading volume was not massive yesterday, indicating that a statement may not be imminent, but with the market focused on other deals, including J Sainsbury, Cadbury Schweppes and Whitbread, some traders believe that Compass may be ready to surprise investors. One said: "Compass stories have done the rounds before but with the stock showing signs of life now could be the time to make shareholders an offer." The shares rallied 5p to close at 316.75p.

The interdealer broker ICAP has survived the recent market turmoil better than most, but the stock went into overdrive yesterday, closing 29.5p firmer at 522.5p. The talk is that the chief executive, Michael Spencer, may be tempted to sell his stake and devote more time to politics. Inevitably, traders began speculating that a sale of Mr Spencer's 21.7 per cent could lead to a full bid for ICAP, with a price of 700p per share doing the rounds.

Early nerves over interest rates sent the market 30 lower in early trade but corporate activity speculation soon encouraged traders in. The FTSE 100 closed 30.9 better at 6220.3, with a positive start to trade in New York underpinning gains in London.

Bid speculation surrounding Mitchells & Butler and Whitbread brought the pub sector back into focus. Punch Taverns topped the mid-cap leaderboard with a 52p gain to 1,193p, Greene King closed 19p firmer at 1,124p and JD Wetherspoon added 26p to close at 736p. Meanwhile, rumours of a Robert Tchenguiz-backed bid for M&B continued to drive the shares higher to close 28p better at 787p, yet another new all-time high.

Mid-cap oils were mixed following a strong set of numbers from JKX Oil & Gas, as it told investors that full-year pre-tax profits rose more than 110 per cent to $109.2m. Profit-taking saw the shares close 9p worse at 298p. However, the hot story doing the rounds is that a Middle Eastern bidder is preparing an offer for Premier Oil after it reports results on Thursday. The word is that an offer in the region of 1,700p per share will persuade management to sell. Despite the chat, the shares shed 11p to close at 1,194p.

Merrill Lynch gave clients a bullish update on the house building sector, despite widespread concerns over the value of US land banks among those that have US exposure. The US investment bank upped Bellway and George Wimpey to "buy", telling clients: "We would maintain that the underlying message coming though from the past few weeks is a reassuring one." The shares rose 14p to 1,476p and 6p to 590p respectively.

On the Alternative Investment Market, Bodisen Biotech gave investors a reminder of the risks of buying stocks doing business exclusively in emerging markets. The Chinese biodegradable pesticide and fertiliser group announced it will end its listing on the American Stock Exchange after failing to provide information requested by regulators and delaying its annual report. The shares, which just over a year ago touched 1,050p, tanked to close 107p worse at 63p.

On paper at least, Bodisen was not the worst performer in the small caps. Xceldiam fell 51.75p to close at 3.25p, a fall of 94 per cent, but investors voted to confirm the sale of its investment arm to Petra Diamonds, effectively leaving the company as a cash shell. Xceldiam shareholders will receive 0.37 Petra shares, worth 60.125p at the close yesterday, for every Xceldiam previously held.

Future Internet Technologies continues to find plenty of buying support, despite spectacular recent performance and wary market makers. The company has risen from under 60p at the start of the year and closed 50p better at 259p yesterday.

Finally, the Aim-listed oil group Aminex reported lower full-year losses but the numbers were ignored as investors reacted positively to the company's 2007 outlook. A recent report valued the group's US interests at $85m, almost the entire current market capitalisation. The shares rallied 1.75p to close at 20.25p.