Utilities spark into life on talk that Warren Buffett has sights on buys

Other billionaires may choose to flaunt their wealth, but the Sage of Omaha, as he has been dubbed, prefers to keep reinvesting it. He is always on the lookout for investment opportunities and, if gossip in the Square Mile is to be believed, he may have again found somewhere to target his cash.

Word is he has been taking a gander at the UK's neglected utility companies with a view to picking up some sizeable stakes. Gas, electricity and water supplier United Utilities responded to the speculation with a rise of 10¾p at 472¾p while water companies Severn Trent added 24½p at 998½p and Pennon 12¾p at 474¾p.

Utilities are regarded as defensive stocks favoured by investors during the difficult times, but with the market having soared 52% this year from its low point in March, they have become more "risk aware". Even so, the utilities still have a strong following among the income funds, which enjoy them because of their high yields.

They are hugely cash generative despite the tough stance on price rises often imposed by the various industry regulators. As consumers are only too aware every time a bill drops on their doorstep, they are also hugely profitable. But, despite their popularity, they have badly underperformed the rest of the stock market of late, which may be why they have attracted the attention of Buffett. UU, for instance, started the year at 642p while Severn Trent was changing hands at 1236p and Pennon at more than 500p.

Leading shares traded within a narrow range for much of the day, having raced up to a 13-month high only yesterday. Early attempts by investors to renew their assault on the 5300 level soon ran out of steam. Even so, investors remain in confident mood and are still pinning their hopes on a year-end rally. The FTSE 100 index slipped 2.50 to 5264.25 after touching 5287.70.

Sentiment received an early boost from BT Group's second-quarter results, which lifted the shares 8½p to 150½p. But profit-taking among the mines and oil firms took the edge of the market's performance. Randgold Resources slid 114p to 4744p while Kazakhmys 31p to 1259p and Eurasian Natural Resources 35½p to 900p.

Among the oil companies, Tullow shed 19p at 1231½p, BG Group 12½p at 1081p and BP 4p at 579¾p. National Express retreated a further 1p to 330¼p in the wake of yesterday's £360 million cash call. JPMorgan has slashed its price target from 445p to 199p. That compares with yesterday's terms of seven-for-three at 105p. JPM still has an overweight rating on the shares.

Newspaper publisher Trinity Mirror said the decline in advertising revenues continues to slow, and it is on course to meet market expectations for this year. Trinity, which owns the Daily Mirror and regional titles including the Liverpool Echo, said advertising revenues fell 20% in the first 17 weeks of the second half, against a first-half decline of 28%. It echoed similar comments from rival Johnston Press yesterday. Trinity rose 12¼p to 181¼p and Johnston was up 1½p to 29¾p.

A confident Paddy Power announced plans to enter the French online sports betting market through a five-year deal with PMU — the French equivalent of the Tote in the UK and a state-owned monopoly. Shares in the Irish bookie firmed 1.50 to 23.80.

Paddy Power also said turnover was up strongly since July, and it is on target to meet City expectations for the year.

London-based estate agent Winkworth started trading on the junior AIM market today. The group raised £1.1 million issuing new shares at 80p a time, and is capitalised at £9.1 million. The shares rose to a modest premium, trading.

Chief executive Dominic Agace said he wanted to raise capital to buy up rivals as the housing market starts to recover.