Market Report: Merger talks boost Shire Pharmaceuticals

The market quietened after a frenetic week, with takeover chat dissipating as traders looked forward to the final bell and their weekends.

There was talk of potential merger activity in the pharma sector with Shire Pharmaceuticals in focus yesterday. Shares rose 31p in the morning on the back of support from Citigroup which upped the group's earnings estimates. The US broker said the group's strong portfolio of new products and its exposure to biologics – a range of medical products including vaccines – showed strong fundamentals at the company. The stock eased to close 21p higher at 1177p.

Trading volume eased yesterday as the market calmed after a manic week. It helped there were no big company reports or economic data announced in the UK, rest of Europe or the US. Simon Denham, managing director of spread better Capital Spreads, said: "Trading on days like this can be seen as quite important because it can give market watchers an idea of underlying investor sentiment when it is not being whipsawed this way and that by outside influences." The FTSE 100 closed up 27.7 points at 6,456.7.

The contracts for stock index futures, index options and equity options, expired in the morning, but they failed to produce a reaction in the market. One trader said: "Everyone always worries about the expiry but it very rarely has that much effect."

The balls-out move by RAB Capital, steaming in to become the biggest shareholder in Northern Rock, settled the market's nerves somewhat. This coupled with reassurances from the Treasury confirming the guarantees it made to Northern's depositors earlier in the week, sent the stock almost to the top of the leaderboard. It gained five per cent to close at 194.25p.

As the long-running consolidation of the life insurers rumbles on, Collins Stewart said the battle for Resolution "is within measurable distance of the end". While there has been no bid as yet, it expects Standard Life to beat Pearl Group to the asset. Resolution soared 18.5p to 702.5p, while Standard Life edged up 1.25p higher to 271.75p.

Elsewhere in the sector, Prudential leapt after poaching Tidjane Thiam from rival Aviva as its new chief financial officer. The move described by Evolution Securities as "something of a coup for the Pru" sent the shares up 1.6 per cent 696.5p.

There was a welcome fillip for Next, when JP Morgan made it its retailer pick and increased its price target from 2160p to 2250p to reflect a better outlook for sales in the next two years. Next soared 50p before profit taking meant it closed up 1p at 1936p.

At the other end, Wolseley was the worst performer in the morning, increasing losses from the previous day. The building materials group had slumped after Citigroup placed five million shares at 867p on Thursday, and fell further as the market's outlook was bearish towards Monday's results. It was overtaken by the end of the day but closed down 2.08 per cent at 848.5p. It was a solid day for the second string, with the FTSE 250 closing up 80.9 points at 11094, topped by PartyGaming. Investors were looking for a bargain after weeks of losses, and the online gamer rallied 9.47 per cent at 26p.

Worst performer in the morning was Beazley Group, after UBS downgraded the stock to "neutral" from "buy". The Swiss broker maintained its 185p target, but said Beazley's out performance of the sector and the FTSE 250 meant it was now fully valued. The stock, which lost 1.85 per cent, was overtaken by Randgold by the final bell, which gave up 4.34 per cent to close at 1521.

Outside the FTSE 350, Bespak rose 60p after it revealed it was in takeover talks with an unnamed suitor. The drug group put out the statement after its shares leapt 77p the day before. The shares weakened dramatically towards the end of the day and it closed down 12p at 703p.

Penny stock Pentagon Protection was a strong performer on the growth market, The group, which supplies and installs enhanced glass protection, rose 19.35 per cent to 0.925p after winning a $433,000 (£216.5m) contract to supply US forces in Iraq.

Avanti Screenmedia also enjoyed support after raising £680,000 through a convertible loan and a placing improved its cash position. The shares closed up 1p to 9.75p. At the other end was Alphameric after admitting the deterioration of its Amalgamated Racing joint-venture would hit profits. The statement that it expects a "significant loss" for the year and it needed extra funds for betting channel JV causing the stock to lose half its value closing at 13.75p.

API Group also had financial problems, as it identified a cash flow shortfall in its UK business and its bank facility limits will be breached in two months. The shares gave up 49 per cent to 41p.