Market Report: City hangs up on TalkTalk as takeover hopes fade

Dading hopes of a takeover deal knocked TalkTalk Telecom, the broadband internet provider which was spun out of Carphone Warehouse this year. The stock ended last night's session down 2.8p at 147p after JPMorgan Cazenove warned that, while the market might still be expecting a bid, potential predators were likely to remain on the sidelines for now.

The broker said deal activity was unlikely until there was more clarity about TalkTalk's business model as the infrastructure was overhauled and Britain switched to high-speed fibre-optic cables, and until the Tiscali UK acquisition was fully integrated.

"Near-term movement on TalkTalk as a merger and acquisitions target is unlikely," JP concluded. It stuck with its "neutral" stance but scaled back its target price for the shares to 145p.

overall, the markets were lower, with the FTSE 100 closing at 5,555.97, down 36.93 points, and the FTSE 250 edging 28.66 points lower to 10,563.81. The lack of activity was blamed on nervousness ahead of a key US jobs report later this week. The bulls were also worried by the latest missive from Albert Edwards, the widely followed market strategist at Société Générale.

"Extreme oversold conditions in the equity market triggered the rally that started in July and continued in September," he said. "The favourable technical factors have now unwound and we are ready for another leg down. The cup, so recently half full, will look half empty."

In terms of the day's movements, the miners were held back as commodity markets paused for breath. Copper prices, for instance, remained steady as the dollar firmed. As a result, Kazakhmys was among the weakest of the blue chips, falling by 38p to 1,423p. Xstrata fared worse, losing 32.5p to 1,209p against the backdrop of reports that a Singaporean firm was mulling a bid to counter its offer for Australia's Sphere Minerals.

Anglo American, though more resilient, also failed to make any headway, easing back 32p to 2,538p as the market overlooked a push from Goldman Sachs. The broker argued against recent concerns about the miner's growth projects. Beyond that, Goldman said Anglo stood "a good chance of capturing high margins on rising volumes" as growth projects ramped up. "The main risk to our view is the delivery of the Minas Rio project [in Brazil]," Goldman added, reiterating its "conviction buy" view. "Further delays are likely to lead to ongoing underperformance."

Elsewhere, the outsourcer Serco was 10.5p behind at 597p. The weakness was blamed on nervousness ahead of the Government spending review later this month, which is expected to pave the way for sharp reductions in public spending. Capita was also held back, easing by 3p to 785p as traders awaited further clarification of the Coalition's budget plans. The mobile satellite group Inmarsat was undermined by reports at the weekend that Harbinger was looking to place part of its 28 per cent stake. The American hedge fund said that, while it was reviewing its options, "no decision has yet been taken". The reports were at odds with previous market rumours, which pointed to the possibility of Harbinger mounting a bid for Inmarsat, whose shares closed down 13.5p at 655p.

Meanwhile, Premier Foods soared by more than 10 per cent, gaining 1.69p to close at 17.9p amid hopes of disposals. The debt-laden food producer confirmed it had received approaches for its meat-free food business, which includes the Quorn brand. Reports at the weekend suggested that a successful sale could net up to £250m, driving up interest in Premier's shares.

Also on the upside, Wellstream was 15.5p better off at 789p as investors continued to wait for further news about the bid approaches disclosed last month. In keeping with market rumours at the time, General Electric was mooted as the frontrunner in the race to acquire the oil services group.

The speculators had less success around the support services group Rentokil Initial, which was once again mentioned as possible target for a break-up bid. The rumours were sketchy and there was little detail about the identity of the suitor or the potential offer price.

In the past, Rentokil has been mooted as a possible target for private equity investors. Its shares closed down 0.2p at 101.3p.

jupiter fund Management fell 8.2p to 252p after Numis revised its forecasts and moved the stock from "buy" to "hold" to reflect movements in performance, market and foreign exchange. The broker remained positive about the company's prospects, however, commending Jupiter for what it termed "a more valuable and less volatile" balance sheet than most asset managers.

"We believe the group deserves a premium valuation to reflect premium growth, low earnings volatility and superior margins, which it now broadly has," Numis said, switching its target price from 280p to 278p.

In the wider sector, Numis stuck with its "add" recommendation and 388p target price for Bluebay Asset Management, the fixed income fund house, which closed 2.4p lower at 342.2p last night.