Market Report: Prospects of Stelios bid send easyJet higher

The high-profile entre-preneur Stelios Haji-Ioannou was the talk of the Square Mile yesterday as punters speculated about the future of his easyJet airline while mobile phone sector analysts were busy trying to get to grips with the impact of his latest foray into the industry.

The high-profile entre-preneur Stelios Haji-Ioannou was the talk of the Square Mile yesterday as punters speculated about the future of his easyJet airline while mobile phone sector analysts were busy trying to get to grips with the impact of his latest foray into the industry.

The excitement surrounding easyJet had by far the biggest share price impact as the airline's stock soared 7.5 per cent, or 10.5p to 150.5p. The movement sparked talk that Stelios may be about to launch a bid to take the company private. He and his family already control 41 per cent of easyJet but analysts said they would be surprised to see him make an offer for the group just yet.

Although Stelios has said that a bid by him and his family is a possibility, he recently indicated that he had no plans for such a coup. Analysts suggested that a more likely reason for the jump in easyJet shares is the continuing fall in the price of oil. Yesterday, crude fell for the fifth day in a row. The budget airline has been among the worst affected in Europe by sharp rise in the value of oil.

Meanwhile, mmO ₂ dropped 1p to 91.5p after Credit Suisse First Boston warned that easyGroup's move into the mobile phone sector could spell trouble for the operator. The Swiss broker noted that easyJet, Ryanair and other budget airlines have had a dramatic impact on the airline industry, taking 20 per cent market share in Europe over the past ten years and contributing to a 60 per cent decline in prices over the period.

Now easyGroup is planning to extend its low-cost business model to the mobile phone arena, via a deal with Denmark's Telmore. CSFB fears that once the service is up and running, it will hit prices in the UK market hard. CSFB pointed out that mmO ₂ is most exposed to this.

GlaxoSmithKline was the flavour of the day in the pharmaceuticals sector as Deutsche Bank ushered investors into the stock following a significant patent success for the group. GSK jumped 27p to 1,131p as the German broker highlighted the important impact of the company's successful defence of its Zofran drug patent in a US court.

Zofran, an anti-nausea drug, has annual sales of £550m in the US and Deutsche calculates that earnings at the pharma giant will be boosted by 3 per cent next year and by 5 per cent in 2006 as a result of the legal success. "In our view this should help GSK shares to rise closer to our 1,200p price target," said the broker.

The wider FTSE 100 index closed 42 points better at 4,453 in light volume while the FTSE 250 rose 37 to 6,073.6. Antofagasta was unchanged at 985p despite news that the Chilean parliament had defeated a proposed 3 per cent royalty on copper. This was expected to cost the mining giant some $30m. Although it is unclear whether there will be another attempt to push the proposal through the Chilean parliament, analysts were in agreement that the news certainly delays its implementation by some way.

Manchester United improved 5p to 257p after the club confirmed that it had made a bid for the Everton striker Wayne Rooney. Robert Wiseman Dairies added 13.5p to 223.5p after winning a milk supply contract with Sainsbury's at the expense of rival Arla Foods, down 2.25p to 49.75p. According to Investec Securities, the deal goes some way to replacing the Asda contract Robert Wiseman lost to Arla back in May. Further newsflow is expected from the industry in the coming months as both Tesco and Morrison review their milk supplies.

Northern Recruitment dropped 6.5p to 160p as Hamish Melville, the group's chairman, sold 74,000 shares at 160p. The company said that the disposal is part of Mr Melville's plan to step down from the board of Northern Recruitment at October's annual meeting. CeNes Pharmaceuticals rose 1p to 9.37p amid hopes that the biotech will soon issue data for its post-operative pain treatment M6G. Results from Phase III trials, which commenced last September, are due soon.

Alpha Airports gained 4.25p to 86.75p on talk that next month's results are set to impress thanks to strong sales growth at the group while Monterrico Metals rose 10p to 416.5p after the mining group went on a roadshow of City institutions.

Finally, there were yet more new issues on AIM. Investors were particularly excited about Mediasurface, which raised £2m via a placing at 12p. The company specialises in website software and boasts Michael Jackson, the chairman of Sage, and Francis Maude, the former Conservative minister, among its directors. It also enjoys blue chip clients such as EMI, Prudential and Aegon. Mediasurface, which should be profitable to the tune of £500,000 by next year, finished the day at 13p.

Elsewhere, KBC Peel Hunt raised £23.5m for Spice Holdings, a utilities support services player, at 115p. Heavyweight institutional investors are said to have subscribed for the issue, so brokers were not surprised to see the stock close at 132.5p.

MARKET MOVERS

ITV 105p (up 2.75p, 2.7 per cent). Smith Barney tells its clients to buy into the broadcaster ahead of results from the group next month.

Tomkins 259.5p (up 5p, 1.9 per cent). The engineer posts better than forecast interim results.

Vedanta Resources 307p (up 13p, 4.4 per cent). Dealers report institutional demand for the stock.

Aquilo 1.75p (up 1p, 133 per cent). Management says it knows of no reason for the sharp drop in its share price since the group's May float.

Honeygrove Group 9.75p (up 1.25p, 14.7 per cent). Confirms that it has received a preliminary bid approach.

Sheffield United 9.25p (up 1p, 12.1 per cent). Unveils £8.8m fund raising via the issue of 89 million shares at 10p.

East Surrey Holdings 326.5p (up 31p, 10.5 per cent). Says that its Phoenix Natural Gas unit has reached an agreement with its regulator.

Imperial Energy Corporation 127.5p (up 11p, 9.4 per cent). Announces an acquisition in the Tomsk Oblast of Western Siberia.

Hightower Construction 9.5p (up 0.75p, 8.6 per cent). Confirms that the company is in acquisition talks.

Rentokil Initial 147p (down 6p, 3.9 per cent). Posts its first drop in interim profits for three years and says it has no plans to break itself up.

William Hill 545.5p (down 9.5p, 1.7 per cent). Investors switch out of William Hill and into Hilton Group after solid results from its Ladbrokes unit.

Singer & Friedlander 273.75p (down 8.75p, 3.1 per cent). Burdaras, the Icelandic investment company, says it has raised its stake in the merchant bank to 9.4 per cent.

Contentfilm 13.5p (down 4p, 22.9 per cent). Terminates merger talks with First Look Media.

Slimma 58.5p (down 6.5p, 10.0 per cent). Issues a profit warning complaining that its high street business has been hit by the bad weather in July and August.

Michelmersh Brick 75.5p (down 8p, 9.6 per cent). Interim results fail to excite the market.