Market report: Friday close

 

SOME of the City's most aggressive hedge funds were piling into BAA today as uncertainty and speculation over its merger situation created ideal conditions for a quick profit.

Heavy buying of contracts for difference and convertible bonds pushed the airport operator's shares up 39p to 814p with more than 40m changing hands. The story circulating in some quarters was that Spanish suitor Ferrovial was close to announcing the members of a bidding consortium.

However, today's surge was just as sudden as yesterday's 7% plunge, which was also blamed by traders on heavy hedge fund activity, precipitated by rumours that Ferrovial had actually found another focus for its takeover ambitions.

Persistent support for BAA, together with a handful of other takeover rumours, helped the FTSE reverse earlier losses to close 52.0 points higher at 5907.9.

In New York, better-than-expected non-farm payroll figures, increased the likelihood the Federal Reserve will raise interest rates at the end of the month, but the Dow Jones showed a robust face, up 61.50 points at 11,033.80.

Lloyds TSB jumped 4½p to 535½p on reports that UBS has been asked to advise a major European bank looking to make a bid. Traders said the bank was likely to be Spain's BBVA, and pointed out that it could pay 650p a share and boost earnings by 10% in the first year. Takeover rumours have provided much of the upward momentum for Lloyds, which has risen almost 100p in the past five months.

 
• Don't miss... biggest stories of the month
 

Rolls-Royce climbed 5¾p to 447p, driven by speculation that US defence company General Dynamics was lining up a 650p-a-share bid. However, traders said there was little substance to the story and claimed the British Government could block the deal with its golden share. A story that private equity players were planning to buy BT, down 3p at 224½p, won the Friday prize for least likely takeover, with analysts lining up to rubbish the tale.

South African miner Anglo American recovered after investors fretted that the company has run out of steam. These fears were crystallised in a Morgan Stanley note to clients that suggested management has lost the rejuvenating momentum, and 'new Anglo' will be 'disappointingly similar to the old'.

The broker advised clients to sell, changing its stance to underweight from overweight and slashing its forecast. It now reckons 2006 earnings per share will be nearer to $2.75 than $3.35, while the 2007 figure is cut to $2.71 from $3.19. Anglo closed 6p up at 1978p.

Asda and Sainsbury's today both said they would cut milk prices by 1p, sparking a sell-off in their suppliers.

Arla Foods was down 1¾p at 65½p and Robert Wiseman fell 4¾p to 287p. But rival Dairy Crest rose 6½p to 494p.

Poor results from Period Homes-to-Guitar magazines publisher Future zapped confidence in bigger rival Emap.

Future's warning that challenging conditions will slash this year's profits by up to £5m saw Emap fall 5p to 935p. Analysts at stockbroker Panmure Gordon said: 'The readacross for Emap is clearly negative. Around 50% of its business comes from consumer magazines.'

But Panmure repeated its hold recommendation and its 970p target.