Market Report: Inmarsat's shares rocket after bid rumours return

Takeover talk was circling Inmarsat again last night, as the return of vague bid rumours sent the satellite telecoms group into orbit. A frequent subject of speculation, the latest revival prompted a late spurt that saw the company close 15.2p better off at 437.2p – a new, two-month high.

Hopes that Inmarsat – which was demoted from the Footsie last year – might be snapped up have been around for a while now, and its boss, Andrew Sukawaty, helped stoke the rumour mill last September by admitting it was "natural" that private equity firm could be interested in investing.

However, its share price has been on the slide in recent months, with the group hit last month by its partner LightSquared's plans to build a high-speed wireless network across the United States facing difficulties with regulators amid claims it interferes with GPS systems.

Yesterday's reheated rumours – which suggested a potential price for Inmarsat of 700p a share – once again claimed a possible approach could come from private equity. US giant General Electric was another name in the frame, although City voices were rather sceptical over the idea while traders were treating the familiar talk with a large dose of salt.

It is not the first company that has been boosted by the return of bid rumours this week. Takeover speculation was revived around Shire on Monday, and the blue-chip drugs maker was still advancing yesterday. It gained another 50p to 2,179p, with Goldman Sachs' analysts helping by keeping the drugs maker on their "conviction buy" list.

The FTSE 100 edged down for the second straight day, finishing just 1.94 points lower at 5,890.26. Still, there was plenty of optimism doing the rounds that, despite the benchmark index having already added over 300 points this year alone, there was more upside ahead.

Pointing out that last month was the strongest January for more than a decade, Citigroup said "recent improvements to the macro backdrop" meant it is "more confident the current rally can be sustained".

Meanwhile, Morgan Stanley's Bruce Hamilton predicted "a further leg-up" for the markets and upgraded his recommendation on interdealer broker Tullet Prebon (up 7.9p to 322p) and fund manager Henderson (up 1.5p to 121p) to "overweight" as a result.

Not everyone was so optimistic, however. Northland Capital's Zeg Choudhry said he feels that "even if we assume economic conditions improve, we are very close to a correction of between five and 10 per cent before we resume a rally as markets are pricing a lot of good news".

The top-tier index was being weighed down by a warning from China that its industrial growth this quarter looks set to slow. With Burberry particularly susceptible to any bearish noises from one of its key markets, the luxury brand retreated 26p to 1,420p, while the heavyweight miners were also badly hit.

Xstrata and Glencore dipped 61.5p to 1,200p and 17.5p to 443.25p as leading shareholders voiced their opposition to the merger after an all-share agreement was announced. Talk was also doing the rounds in the Square Mile that, because of the valuation difference between the two in the deal, a number of investors were trying to short the latter but were unable to thanks to a lack of available stock.

Fears Capita may be about to lose out on yet another contract helped the outsourcer to finish in the red. The group has had a number of disappointments this year already, and Espirito Santo's David Brockton claimed that – despite being the favourite – the likelihood of being chosen by the army to take control of its recruitment activities is not as clear-cut as the market believes.

The analyst also reduced his rating on the group to "sell", warning that it "will continue to attract greater competition, with the business insufficiently diversified by geography to offset this pressure", and Capita promptly responded by slipping 1.5p to 633p.

Having climbed 50 per cent since December, Misys took a breather after Berenberg's Daud Khan said that it was now "richly valued" and downgraded his advice to "hold".

The software firm was left 8.9p worse off at 326.1p on the FTSE 250 as the analyst added that merger talks with rival Temenos should be concluded "within a short timeframe", although there has been persistent chatter suggesting a rival bid could soon emerge.

Down on AIM, Solo Oil was smacked back 23.33 per cent to 0.58p after the first drilling of the explorer's joint Tanzanian well with Aminex failed to strike oil or gas.

Going in the opposite direction was Totally. The media group was in rude health following confirmation that it had won a NHS contract worth nearly £1.6m, jumping up 172 per cent to 1.7p.