Return of takeover talk boosts demand for International Power

It's not a new story, but if they say it loud and often enough, who knows, an offer just might materialise.

The story was certainly generating interest today with the price of IP racing ahead 9½p to 285¼p, making it one of the best-performing blue chips, as a healthy 16 million shares changed hands. This time it is being linked with the giant GDF Suez. According to the gossips the French are prepared to pay up to 400p a share which would value IP at £11 billion, including debt.

Brokers like Merrill Lynch have always argued that the international fit between the two companies was "excellent". They both operate in similar states in the US and have exposure to private power plant projects in the UK. GDF has a strong balance sheet and could easily absorb IP. Merrill says: "Such a deal would make sense from a strategic and financial standpoint."

Elsewhere, leading shares were being squeezed higher again in thin trading. The FTSE 100 index was back on course as it nudged towards the 5400 level, posting a rise of 36.81 at 5360.77. Once again it was being supported by a strong showing from the miners and banks.

Lloyds Banking Group continued to attract support in the wake of publishing the terms of its heavily discounted £13.5 billion rights issue. The shares responded with a rise of 1.33p to 95.14p. The new shares are being issued at 37p.

The gold price extended this week's record-breaking run as it traded above the $1178 (£705.38) an ounce level, stretching its rise since the start of the month to 13%. Investors are continuing to plough cash into the precious metal as they take advantage of a weak dollar in the short term amid fears that the US recovery might have stalled. There are also signs that the price is being held up by India which has indicated that it will continue adding to the 200 tonnes it recently bought.

Not surprisingly, Randgold Resources responded positively to the hike in gold's price, trading near the top of the leaderboard up 130p to 5170p. It was closely followed by Anglo American, 69p higher at 2686p, and BHP Billiton, 50p at 1907½p. Other miners to go better included platinum producer Lonmin, up 48p at 1805p, and Kazakhmys 19p better at 1300p.

Gilts responded positively to the GDP revision. The UK economy continued to contract during the third quarter, but not as fast as earlier forecasts.

It contracted by 0.3% during July to September, compared with earlier estimates of a 0.4% decline. Some economists had pinned their hopes on a strong upward revision.

Gilt futures rose to their highest level for six weeks. The December series rose 22 ticks to £118.92, after hitting £119.07.

Man Group, the UK's biggest hedge fund operator, tumbled 14½p to 333p, making it the biggest faller in the Footsie 100. Dealers say investors are selling the shares following yesterday's downgrading by Credit Suisse.

United Utilities, down 7¼p at 478¾p, is the latest water supplier to blame the recession for a drop off in demand as it struggled to make headway during the first six months of the year. The UK's biggest water supplier is focused in the flood-hit North-West and saw underlying operating profits advance only 1% to £369.9 million.

Rivals Severn Trent, down 9p at 995p, and Northumbrian Water, 3p firmer at 256¼p, have already complained this week about the impact the recession is having on water demand among its business users.

Tomorrow the industry regulator Ofwat is due to announce how much more the water companies can charge customers over the next five years.

As already indicated, the price rises are expected to be somewhat less than generous, much to their chagrin.