M&A boost fails to keep markets in the black

Resources stocks were resilient in a falling stock market this morning as takeover speculation boosted the sector.

On a quiet day for the markets, with no economic figures and no UK companies reporting, BG Group  led the risers, up 5.78% to £10.89, after speculation in the Daily Mail that the gas producer could be the subject of a cash bid by Royal Dutch Shell.  

Anglo-Australian miner BHP Billiton, which on Wednesday launched a $130 per share cash offer for PotashCorp, was up by 0.88% to £18.26.

David Jones, chief market strategist at IG Index, said there is an undercurrent of negative sentiment that was keeping markets in check: 'It is currently hard to tell whether the recent glut of takeover bids is born out of a genuine shift in sentiment, in which CEOs feel there are significant opportunities for growth, or whether cash that has been stockpiled during the tricky economic times is starting to burn holes in the pockets of business leaders.'

BP was among the stocks dragging the blue chip index down. The Associated Press obtained a confidential document showing that Transocean, the company that owned the oil rig that exploded in the Gulf of Mexico, has accused BP of withholding critical evidence needed to investigate the cause of the spill.

Overall, continuing fears for the economic outlook as well as the fall-out from falling US stock markets, kept the blue chip index lower, down 0.3% at 5195.

The falling mid-cap index, down 0.56% at 9779, also got a slight boost by M&A action, with Dana Petroleum rising 5.6% to £17.91. The Aberdeen-based oil and gas explorer was the subject of a hostile £1.87bn takeover bid from the Korea National Oil Corporation (KNOC), worth £18 a share in cash. The state-owned energy company said it had secured irrevocable support for its offer from 48.62% of Dana's shareholders.

In a statement to the stock market this morning, Dr. Seong-Hoon Kim, senior executive vice president of KNOC, said: ‘We believe that we have no alternative other than to put our attractive proposal directly to shareholders given the inability to reach a private agreement with the Board of Dana.

‘We hope that Dana Shareholders will recognise the merits of our offer in order to bring this process to a successful conclusion.’

US stocks had tumbled on Thursday, with benchmark indices closing at the lowest in a month, after surprisingly weak manufacturing and jobless data shook investor confidence. The Labour Department said that initial claims for unemployment insurance rose last week by 12,000, to 500,000. Wall Street analysts had expected the seasonally adjusted claims to drop.