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Imperial Tobacco climbs on bid speculation but FTSE falters after recent surge

Imperial Tobacco bucked a falling market as it became the latest FTSE 100 company to be the subject of takeover speculation.

The maker of John Player Special and Lambert & Butler cigarettes rose 5p to £21.61 as traders heard talk of a possible bid from overseas, perhaps from America or China, with a price of £35 a share being bandied around. In the past British American Tobacco and Japan Tobacco have both been mentioned as potential predators.

Meanwhile BG jumped 41.5p to 1262.5p following talk on Tuesday of possible interest from China. It was also boosted by an upgrade from Goldman Sachs which raised its recommendation from neutral to buy with a £17.60 price target. Goldman said:

BG’s share price performance this year has been lacklustre: down 12% year to date in dollar terms, barely outperforming its peers. Yet, the outlook across its business has improved materially: liquefied natural gas (LNG) pricing is up 77% year to date; the resource base in Brazil has doubled in size; the Tanzania acreage has yielded interesting discoveries.

The third quarter results are not likely to be a catalyst for the stock, given that high maintenance in the North Sea is likely to dampen exploration and production results. We believe the key event in the next six months is the February strategy presentation, which has consistently been a positive catalyst for the past six years. We also believe the fourth quarter results could show very strong profitability in LNG, while E&P would benefit from the re-start of the North Sea production.

BG’s exposure to some of the most attractive new hydrocarbon developments in the world (Brazil deepwater, coal bed methane to LNG in Australia, unconventional gas in the US) could attract the interest of national oil companies eager to gain access to these new technological frontiers. We believe that BG could do some very attractive farm-outs of its assets.

Man was the biggest faller in the leading index, slumping 59.6p to 180p or nearly 25% after the hedge fund manager issued a disappointing trading update as clients withdrew cash over the summer at the fastest pace since early 2009.

Cairn Energy closed 19.1p lower at 276.5p after it announced another dry well in its controversial drilling programme in Greenland. Will Arnstein at FinnCap said:

We remove the prospect from our net asset value, which had been included at 13.2p a share.

Overall the FTSE 100 lost much of Tuesday’s gains ahead of a visit to Greece by the European Union and International Monetary Fund to scrutinise the country’s new austerity plans. The leading index lost 76.42 points to 5217.63 despite an opening rise on Wall Street following a rebound in US business spending.

Smiths Group added 21p to 969.5p as a 12% rise in full year profits to £486m for the technology business came in ahead of expectations. In a buy note analysts at RBS said:

We believe it possible that the defensive merits of Smiths may be enough to provide support for the shares at this level. Further, the issue of ‘portfolio management’ might well resurface, in our view. There is also clearly scope for significant self-help in detection. Nonetheless, the icing on the cake would have been for Smiths to have some significant positive momentum going into 2012 and that is missing, in our view. Looks like 2012 may be a bit of a grind, but Smiths has been counselling such for some time and it is hardly going be alone, in our view.

Among the mid-caps Domino’s Pizza dropped 50.4p to 458.1p after an underwhelming trading update. Simon French at Panmure Gordon said:

Domino’s has reported a worse than expected third quarter, with like for like sales of 3.9% versus our forecast of 5.5%. Bearing in mind this quarter had the full benefit of stuffed crust, Gourmet pizza and upweighted advertising spend, including the sponsorship of Red or Black?, we think the market will be disappointed with the update. For a stock we forecast to grow earnings 13% this year, we view it as too expensive. We reiterate our sell recommendation and 350p target price.

Bwin.partydigital fell 8.6p to 119.2p, hit by news that a German court had upheld a ban barring private sector companies from operating online gambling sites.

But the day’s standout performer was Aim-listed Angle, up 129% to 64.25p after it said a cell separation device from its Parsortix division could be used to isolate and capture very small numbers of cancer cells from blood. It is in discussions about the device with a number of cancer research institutes. Collins Stewart said:

We see this as not just a major validation of the Parsortix technology, but a significant broadening of Angle’s commercial opportunity. Parsortix is aiming to seek both FDA approval and European CE mark accreditation by mid 2013. Such approvals would open up multi billion dollar clinical markets including cancer detection and monitoring, in addition to the immediate market available for research purposes. By this point, we would anticipate Parsortix to have attracted commercial interest from majors. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds