Market Report: Morgan Crucible is back in takeover spotlight

Talk of renewed takeover interest in Morgan Crucible surfaced yesterday afternoon. The mid-tier industrial ceramics group was up 4.75p, but retreated with the market, after talk of the possible bid from an unnamed suitor. It closed down 2.25p at 312.75p.

Morgan was close to being taken out in 2006, with rumoured interest from DLJ, the private equity subsidiary of Credit Suisse. Exactly a year ago yesterday, Morgan issued a statement that talks had been called off, sending the shares tumbling.

There was further speculation of a bid from the Middle East for British Land. One trader said the offer was expected next week. It failed to bolster the stock, which closed down 6p at 1,033p.

Property stocks were down en masse after an aggressive sector review from Morgan Stanley. The US broker said its "bear case" for fair value by the end of 2008 was 32 per cent below current share prices.

Investors piled into Carphone Warehouse in the morning, after news of a mobile operator deal with Vodafone. The stock topped the leaderboard at lunch-time as Collins Stewart reiterated its "buy" recommendation and a price target of 420p. It rose 1.82 per cent to 336.25p, after the broker said it was "under-owned and high growth".

The market was helped up by Home Retail Group, which strengthened 1.55 per cent to 336.25p. The group, which owns the retailers Argos and Homebase, revealed pre-tax profits were up 40 per cent to £149.8m. Evolution Securities said the results were good but added it has "long-term concerns" over the two chain stores. Engineering companies BAE Systems and Rolls-Royce Group stormed highest by the end of the day. Traders said this followed a good read across from Boeing's third quarters in the US. BAE closed up 3.36 per cent to 507p; Rolls strengthened 2.44 per cent to 546p.

In the insurance sector, Aviva rebounded, rising 0.36 per cent to 704p. It slid last week after investors were disappointed with its plans to overhaul the group. Deutsche Bank said the weakness was a good opportunity to buy into the stock. There was also further talk of a merger from Italy. Reports revealed activist investor, The Children's Investment Fund, had proposed that Generali attempt a tie-up with Aviva or Prudential.

It was an uncertain day for the markets. The FTSE 100 shook off early lethargy, before sliding downhill after a shove from the Dow. It closed 32 points lower at 6,482. New York fell 167 points in the morning, smashed by poor housing data, Merrill Lynch's third-quarter results statement and talk of a write-down at Lehman Brothers.

Back in London, things were not looking so rosy for Kazakhmys. The mining giant slumped 7.27 per cent to 1,377p as it reported "disappointing" third-quarter production numbers, according to Seymour Pierce. Total ore mined was down 18.6 per cent on a year ago, causing the broker to lower its recommendation from "hold" to "underperform".

The profit-takers sold into Reckitt Benckiser after sales were at the top of expectations in its third quarters. It closed down 4.88 per cent to 2,728p.

On the second tier, Cairn Energy dominated as talk of a potential takeover refused to recede. The previous day's rumours that BP could be interested – rejected by several traders as a ramp – was picked up by Merrill Lynch. The broker reminded the market it believes Cairn is "by far the most potential M&A candidate in the European energy and petroleum sector". One trader said: "I don't think BP will bid. If anything, it would be as Cairn's senior partner to fund the development of its Rajasthan field." It topped the risers, up 6.35 per cent at 2,413p.

The telecom testing equip-ment developer Spirent Communications was up in the morning as the market awaited the results from its strategic review. It weakened to close 0.25p lower at 66.25p.

The engineering group Bodycote International was down after investors banked profits on the back of a solid third-quarter update. It closed down 3p at 292p. There was no mention of merger activity. Swiss rival Sulzer had a £1.1bn bid rejected in April and was forced to walk away for six months. It can renew its advances from Saturday.

The worst performer outside the FTSE 350 was Equator Exploration, which returned with a bang after its reverse takeover talks collapsed. The group shed 64.5 per cent to 15p as it announced losses had widened dramatically in its interim results.

Dominion Petroleum had a bit of a run – up 6p to 45.5p – off the speculation surrounding Cairn Energy.

The oil and gas group Anzon Energy was also up after it agreed to a takeover approach from ARC Energy. The deal, which will create a combined company worth A$1.1bn, sent Anzon's shares up 13 per cent to 121.5p.