Market Report: Shire perks up on AstraZeneca buzz

Rare diseases are Shire's bag and it is this expertise in life-threatening genetic illnesses that has caught the eye of rival AstraZeneca – well that is what traders would have us believe anyway.

Shares in the drug maker Shire perked up 49p to 2,082p today as the rumour circulated that a potential bid could emerge from its peer AstraZeneca.

AstraZeneca, down 4.5p to 3,037p, is well known to want to stock up its medicine cabinet after a series of disasters with its own drugs pipeline. Chief executive Pascal Soriot, who joined last year, is tasked with the job. This week Mr Soriot reshuffled his top-level team. The jobs of president of research and development and the global commercial executive vice-president will disappear and a post will be created to lead research and sales. The restructure of the 13-strong executive committee comes ahead of strategy presentations and the full-year results at the end of the month.

Seasoned traders played down the Shire rumours and instead hinted that the water company United Utilities was a more likely target for an imminent takeover on the blue-chip index. Its shares trickled up 14.5p to 712p.

The biggest riser of the day on the top-flight index was the travel group Tui Travel. It confirmed it is in talks for an all-share merger with its German parent Tui. The Takeover Panel set a 13 February deadline to announce an offer and the shares travelled up 11.1p to 292.5p.

Merger mumblings excited punters, but across the wider market investors were feeling downbeat following a gloomy outlook from the World Bank. The FTSE 100 index did pick up slightly during the afternoon session, however, and ended 13.33 points lighter at 6,103.98.

Angus Campbell, head of market analysis at Capital Spreads, said: "There is also the added uncertainty looking ahead to the impending US debt ceiling negotiations. This combination sent riskier stocks such as miners lower and they have barely joined in the reversal that's been taking place in the latter part of the session, which indicates there is still nervousness when looking ahead to the coming weeks."

Banks were one of the biggest losers of today's sell-off after the Bank of England said fresh capital could be required. Lloyds Banking Group, one of the recent star risers, declined 1.36p to 53.01p, and Barclays dipped 2p to 293.4p. Royal Bank of Scotland got a share-price target upgrade from Nomura's scribes to 270p, but they retained their reduce rating and the shares lost 4p to 350.1p.

Imperial Tobacco was puffing down at the bottom of the index, off 116p to 2,368p. Analysts at Renaissance Capital retained their hold rating on the stock but today raised their share price target to 2,700p, up from 2,650p.

There is nothing quite like a food scandal to put punters off their grub, and – in the case of Tesco's horsemeat debacle – off the shares too.

The supermarkets giant has been found selling burgers containing horsemeat, and its shares were off the pace, falling 2.5p to 347.1p.

While the meat is not dangerous, the news was met with understandable outrage. Clive Black at Shore Capital warned that Tesco is facing a huge issue of "consumer deception and offence".

Tesco is trying to put the issue right but Mr Black points out that the damage to its reputation may be huge and the "sell-through rate of processed meats such as beefburgers" will be hit.

On the mid-cap index, Irn-Bru owner AG Barr's shares fizzed up 1p to 501p and Robinsons and Tango maker Britvic's share price sparkled with a 1.5p gain to 421p after it was revealed that the Office of Fair Trading is now expected to make its delayed decision on the proposed £1.4bn merger between the two fizzy drinks groups on 13 February.

The strife-hit Finnish miner Talvivaara said its metals production has stabilised after its gypsum pond leakage but the water balance situation at the mine is still challenging and the shares sank 6.75p to 98.75p.

The small-cap index and China-focused resources company Fortune Oil received a formal waiver from lenders which allows it to go ahead with the sale of its natural gas business and the shares hissed up 0.5p to 11.75p.

Over on AIM, the broker Daniel Stewart Securities' chief executive, Peter Shea, snapped up 3,456,680 ordinary shares at a price of 0.55p each. He now owns around 10.76 per cent of the company. The shares jumped 0.25p to 0.88p.

Chinese gas focused Green Dragon Gas said it exceeded its production goal for 2012 and its shares lifted 2.75p to 262.5p.

Meanwhile the cloud video developer Forbidden Technologies reported strong sales growth and said it is likely to exceed analysts' forecasts. Its shares floated up 2.5p to 23p.