Market report: Friday close

By THIS IS MONEY
Updated: 11:58 EST, 3 October 2008

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Mystery and speculation again engulfed Regal Petroleum as reports of a £666m takeover by Shell were denied.

Movers: Latest share prices

The Daily Telegraph today reported that Shell had written to Regal chairman Keith Henry proposing a deal that values Regal shares at 300p each, a huge premium to the 83p at which the stock closed last night.

But Regal whose shares had begun to soar before settling on a 42p rise to 125p, said unequivocally in a statement to the Stock Exchange that 'no such approach has been received'.

The report and subsequent rebuttal immediately started tongues wagging in a notoriously gossipy industry.

It is understood that a letter proposing such a deal is in existence but there are doubts as to its status. The popular theory is that the letter is a forgery and being used by persons or parties unknown to ramp up the Regal share price. The conspiracy theory is that it is a leak of letter that Shell - a fellow Ukraine explorer - had not yet sent. The least likely theory is that Shell had sent the letter but that the Post Office has yet to deliver it.

Regal founder, 15% shareholder and one-time chief executive Frank Timis caused a storm in 2005 when he appeared to crank up hopes of a major oil find off the coast of Greece only for the wells to be found to be dry, burning many investors who had chased the shares up to 500p. Timis, however, would pocket £99m were a deal to go through at this level.

Elsewhere, fresh moves by the Bank of England to ease the credit crisis as well as a Government commitment to guarantee bank deposits of £50,000 sent UK financial shares soaring and helped pushed the FTSE 100 back into positive territory, up 104.86 to 4975.2. Even so, the blue-chip index looked as though it was heading for a fall over the week of 4%.

In the United States, a counterbid from Wells Fargo for US retail bank Wachovia took the sting out of dismal unemployment figures and the Dow Jones rose 95.8 points to 10,578.7. The vote on the rescue package was not expected till about 6pm UK time.

Among the High Street banks, HBOS led the pack, adding 21.7p to 191.8p, a rise of more than 13% while Lloyds TSB was 28¼p stronger at 290¼p, or 9%.

Other High Street banks showed healthy, if not quite as impressive, gains. Royal Bank of Scotland was 10.2p up at 186.2p and Barclays gained 30p at 368p.

Heavyweight broker Morgan Stanley reckons we have finally reached the bottom of the market and told its clients to prepare for a bear-market rally. In a lengthy report hitting clients' desks today, Morgan Stanley says: 'We believe a significant recession is already largely in the price and we expect a bear market rally from here.'

Falling oil prices renewed pressure on petroleum companies and moderated-FTSE 100 gains. Cairn Energy was down 36p at 1854p while BG was 2p lower at 928p.

Marks & Spencer rose 12¼p to 239½p as the City's leading retail analysts revealed their thoughts on the retailer's future following yesterday's results. UBS is sticking with its neutral recommendation but has trimmed its target to 235p from 275p.

Citigroup's Richard Edwards is maintaining his sell recommendation, noting that the like-for-like drop of 6.1% was slightly better than expected.

He reckons if the expansion programme is curtailed as management indicated, the full-year dividend will be maintained.

Yell was one of the better performers outside the blue-chips with buyers coming in on the back of hopes that it will finalise the renegotiations of its covenants in the next couple of weeks.

Yell was 10p higher at 100p. Analysts say the new deal should reduce near term risk of default and allow it greater operational flexibility.

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Monday's agenda

Another credit crunch, another bank collapse? Who knows who will announce some dramatic news on Monday? This week it was Bradford & Bingley and Fortis, the week before Goldman Sachs and Morgan Stanley gave up their investment bank status, the week before that Lehman went bust. deals orchestrated by central banks and governments tend to be done over the weekend before the Asian markets start trading. Banks are looking wobbly in many countries in Europe as well as the US, so do not be surprised if we get another seismic banking event.

Economic doom-mongers have warned that the result of the economic crisis will be that people at the bottom of the social ladder will revolt. No sign of that yet, thankfully, but take heed of the growing unease across Europe about the rising cost of living. Today Belgium's two main unions go on strike over higher prices. Expect more such actions to follow.