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Thursday 4 September - 4pm update
The steady slide in the oil price may have been good news for motorists and business, but it has played havoc with the share price of BG Group, and City speculators claim this leaves the oil and gas explorer vulnerable to takeover.
BG shares today rallied 38p to 1085p as more than 15 million changed hands, having slumped from 1219p in the past few days. One story doing the rounds claimed BG was ready to drop its contested £5 billion all-cash bid for New Zealand's biggest energy supplier Origin.
The speculators argue this would leave the company, with huge oil reserves in Brazil's Santos field, vulnerable to takeover. Some claim ExxonMobil, the world's biggest oil company, has already started working out the numbers.
The strength of the dollar and the continuing decline in sterling would make such a move even more attractive to a cash-rich company like ExxonMobil. And with the shares still trading on around 11 times earnings, it certainly looks a lot cheaper than rivals, such as Australia's Woodside Petroleum and Galp of Portugal.
The cheapness of BG shares has also been highlighted by MF Global, which has raised its rating from neutral to buy, claiming the recent sell-off provides a good opportunity. The sharp decline in US natural gas prices should give BG's liquified natural gas business an unexpected boost.
The rest of the stock market was a touch firmer for choice despite the vote by the Bank of England monetary policy committee to peg rates at 5%. Some traders argue that the rate of slowdown in the UK economy means there is scope for a cut.
The lower price of oil and other raw materials and the slump in the housing market will take much of the inflation out of the system. But the hawks on the MPC argue that inflation will continue to rise in the months ahead.
That will be bad news for the stock market, which is already suffering from low levels of demand for equities. The FTSE 100 index lost an early lead and was left nursing a loss of 35.6 points at 5464.1.
Over on Wall Street this afternoon, shares were again on the slide, leaving the Dow 104.6 points lower at 11,428.3. The number of jobless claiming benefits grew by 15,000 last week.
Revived takeover talk was behind the rise of 3.9p to 103.1p in Friends Provident. Reports claim the life assurer is again being stalked by Clive Cowdery, who was behind last year's attempt to merge his own company Resolution with Friends Provident. He effectively scuppered the deal by selling Resolution to Hugh Osmond for £5 billion.
Numis has raised its rating on RSA Insurance, up 1.3p at 163.1p, from hold to add, excited by its robust earnings outlook. It has also increased its pre-tax profit forecast for the current year by £110 million to £775 million.
Tax exile Shire fell 17p to 969p after Citigroup placed a line of eight million shares, worth £75 million, at 938p in the drugs company.
Oil and gas specialist First Calgary Petroleums, 5½p off at 166p, is in talks with third parties regarding the sale of the company or a significant asset disposal. The AIM-listed company has responded to recent volatility in its share price and speculation regarding a potential sale.
Southern Cross Healthcare, 12½p firmer at 154½p, has agreed the sale and long-term leaseback of freehold interests of seven care homes.
The deal will generate £21 million for the largest provider of care home services in the UK, which is in talks with potential buyers for the remaining 13 freeholds up for sale. The proceeds will be used to reduce debt by £20.7 million to £33.4 million.
Chief executive Bill Colvin will leave by mutual agreement but has agreed to remain to complete refinancing of the company and the further sale and leaseback of its owned homes.
