Market Report: Dairy Crest advances on frothy takeover hopes

The takeover spotlight returned to Dairy Crest yesterday, as investors' hopes were revived that it could become a bid target.

The dairy products group closed 5.6p stronger at 361.6p in the wake of reports this week from Europe suggesting its French peer, Lactalis, could get rid of its shares in Parmalat after Lactalis was attacked over its stake-building in the Italian company.

Lactalis, whose brands include the Président range of cheeses, has been linked with Dairy Crest before, with chitter-chatter rampant back in 2005 that it could make a move for the owner of Utterly Butterly.

Exane BNP Paribas has now connected the two again, speculating that although Lactalis – which it described as "serially acquisitive" – has "its hands full at present with a 29 per cent stake in Parmalat and its firepower is usually unfathomable... any forced or voluntary withdrawal from this situation would leave Lactalis with a large chunk of cash".

More generally, the broker's analysts kept their "neutral" rating on Dairy Crest, saying despite the fact they "remain cautious on the environment (and will watch Dairy Crest's branded performance closely) we expect the business will manage to hold profits steady".

Overall the FTSE 100 increased by 34.07 points to 6,041.13, its highest level since February, ahead of today's interest-rate decisions from the European Central Bank (ECB) and the Bank of England (BoE). With many predicting the ECB will increase the base rate to 1.25 per cent, WorldSpreads' Alastair McCaig said it could "give the BoE an opportunity to closely monitor how well placed they are to handle such a move".

The blue-chip's gold-medal position was occupied by Marks & Spencer, which – despite expectations that its trading statement would bring yet more bad news for the sector – announced sales had slightly risen over the fourth quarter. Analysts had forecast its numbers would drop by as much as 4 per cent, and the positive surprise meant the high-street institution climbed 20.4p to 360.6p.

Its fellow retailers were also helped, including Next, 65p ahead at 2,096p, and Debenhams, 2.15p ahead at 63p. Halfords increased 12.4p to 368.6p ahead of its pre-close update today, while Mothercare shifted up 15.2p to 405.2p, with the baby-products chain helped by Singer Capital Markets reiterating its "buy" rating, although the broker did reduce its target price to 580p from 780p.

The tour operators were also in favour, with Tui Travel – the subject of renewed bid speculation earlier in the week – and Thomas Cook driven up 5.9p to 234.4p and 5.3p to 173.4p respectively. Both had their ratings increased by Citigroup, with the former upgraded to "hold" and the latter given a "buy" rating, as the broker recommended them on valuation grounds following their recent falls. Vedanta Resources was knocked back 21p to 2,497p after the news that the Indian government has referred its proposed deal to take control of Cairn India to a panel of ministers.

This is the latest in a number of delays for the deal's attempts to gain approval, Cairn Energy – which has agreed to sell as much as 51 per cent of its Indian unit to Vedanta – dropped 13.3p to 456.4p.

On the FTSE 250, bwin.party lost nearly 16 per cent, sliding 31.5p to 166.4p, as fears spread across the market regarding new gambling regulations in Germany proposed after a key meeting yesterday between prime ministers of the country's states.

At the other end, a new record high for gold and vague speculation that Centamin Egypt could soon release impressive production numbers helped the group to add 7.4p to 146.1p. The yellow-metal miner is still about 17 per cent down on the year following the unrest in the North African country, but hopes have been raised that an upcoming analyst trip to its mine could boost sentiment.

The housebuilders were left wanting after Citi cut its recommendation on Taylor Wimpey and Barratt Developments to "hold", with the broker predicting that the sector's shares "may pause for a while".

The groups slipped back 1.84p to 38.4p and 3.2p to 109.1p respectively, despite the latest Halifax data showing a 0.1 per cent rise in house prices during March, although Redrow – which also had its rating downgraded – surged forwards 1.9p to 126p.

Down on the fledgling index, JJB Sports ticked up 0.75p to 29.25p as the sportswear chain announced it had received backing from its major stakeholders for a £65m fundraising.

HMV was on the move yet again, retreating 0.25p to 12p on the small-cap index despite reports that Oakley Capital's founder Peter Dubens could be interested in some of its businesses if a break-up of the group goes ahead; Oakley, which stayed at 146p on the Alternative Investment Market (AIM), declined to comment.

Also on AIM, vague takeover speculation continued around Coal of Africa, and it jumped up 4.25p to 90.25p, meaning its share price has now added nearly 25 per cent in the past five sessions.