Market Report: Schroders steps back into the takeover spotlight

Vague bid talk boosted the asset management company Schroders yesterday. The speculation emerged late in the day, and bore few details. No price was mentioned, nor was there any indication about the identity of the likely bidder.

While the company has often featured in market speculation – some weak rumours about a possible bid last week failed to have much effect on the share price – it attracted some late interest last night, surging 28p, or almost 3 per cent, to 977p, claiming third place on the list of FTSE 100 risers.

Overall, the FTSE 100 dipped 10.90 points to 6,076.50, while the FTSE 250 gained 37.20 to 10,421.10.

The banking sector, which was buoyant and led the market earlier in the week, dealt the biggest blow to the benchmark. The depression was induced by HBOS, which plummeted 6.8 per cent to 657p after publishing a disappointing set of results, and an early morning rumour claiming the Bank of England was about to hold an emergency meeting after being approached for assistance by another troubled bank. And while the speculation soon dissipated (the Bank was reported to have dismissed the rumour around midday), the sector remained firmly lodged in the doldrums.

Lloyds TSB was down 6p to 476.25p, while Royal Bank of Scotland, which was hit after reports of an early placing of 50 million shares at 400p, was down 3.50p to 410p.

After earlier speculation about Lloyds' intentions, Standard Chartered was touted as a likely bidder for Alliance & Leicester or Bradford & Bingley. The talk failed to convince traders, and the shares of all three fell yesterday. Standard Chartered was down 6p to 1,698p, A&L was off 6p to 594p and B&B fell 4p to 202.50p.

As the banking sector fell by the wayside, the mining sector mounted a comeback. Vedanta led the rally, climbing more than 6 per cent to 2,199p, to top the FTSE 100 leaderboard. The Indian mining company was boosted by firmer commodity prices, as was Kazakhmys, which claimed fifth place on the leaderboard, up 39p to 1,589p. Other miners, including Anglo American, which rose 50p to 3,330p, and Antofagasta, 12p higher at 833.50p, also had a good day.

Xstrata was lifted 47p to 4,137p by some late bid talk, which suggested the possibility of a 5,000p-per-share bid from its rival Anglo American. The Anglo-Swiss giant has been at the centre of sector consolidation talk for some time as the market awaits an approach from Vale, the Brazilian miner which is thought to be working on a bid of its own. Shares in Lonmin, the world's third largest primary platinum producer, fell 36p to 3,395p as invest-ors reacted to the news that chairman Sir John Craven and his deputy Roger Phillimore had sold some of their stock in the company.

Credit Suisse published a review of UK water companies yesterday. Analysts at the bank picked Pennon, the Devon-based FTSE 250 company, as their preferred stock in the sector.

Noting that the company's Viridor waste division was "undervalued", they maintained an "outperform" rating on the shares, with a target price of 750p, helping them climb 4p to 645p. FTSE-100 listed United Utilities was upgraded, to "outperform" from "neutral", and its share price added 14.50p to 715.50p.

The review was unkind to Severn Trent, another FTSE 100 stock, which was singled out as Credit Suisse's "least preferred pick in the sector". The company's shares survived the assault, rising 25p to 1,450p. Northumbrian Water was less resilient and fell 3.75p to 350.75p after the bank said it was now "the sector's most expensive stock". The company also suffered a downgrade, to "neutral" from "underperform".

On AIM, the transportation and supply chain management company TDG was lifted after a takeover approach from the activist investor Laxey Partners. Laxey, which already owns around 22 per cent of the company, has made an indicative cash offer of 275p per share, conditional on satisfactory due diligence, financing and TDG board recommendation.

Laxey has a history of moving into underperforming companies and then demanding change. News of its advance on TDG took the target company's shares up 33.25p to 258.75p.

Silverjet, the business-class-only airline which operates from Luton Airport, climbed to an early high of 19.25p on speculation that it had attracted the interest of a larger operator. A bid was mentioned but there were few clues about the prospective suitor. Another rumour suggested that, instead of a bid, the company was about to become the latest recipient of some Middle Eastern larg-esse. Someone, it was whispered, was about to snap up a significant stake.

By the end of the day, however, talk of the bid and the supposed bundles of cash dissipated and Silverjet stock gained a slight 0.25p to 17.75p.