Market Report: Takeover talk engineers gains for blue chip IMI

With market gossips enjoying a busy start to the week, takeover tales continued to dominate investors' attention yesterday as bid rumours pushed forwards a number of companies.

IMI was one of the biggest risers on the top-tier index after being driven up 41p to 1,119p thanks to reheated hopes it could become a target, with vague speculation discussing a potential approach worth 1,600p a share.

The engineer has been linked with a number of possible aggressors in the past, including Honeywell International, and last night the talk, played down by traders, suggested that General Electric – one of the world's biggest companies – could be interested. However, market voices said IMI was also being helped by improved sentiment around the engineering sector as well as optimism that it may return money to shareholders.

Another receiving a boost from takeover chatter was Yule Catto, and rumours Dow Chemicals may be eyeing a move prompted it to reach 249.4p on the mid-tier index during trading. With the suggestion a possible bid could be worth between 350p and 375p a share, the chemical company ended up closing at 241.1p – a climb of 11.1p – which is its highest level since 2003.

Henderson Group was also the subject of speculation, following vague talk it may be in the sights of the Australian bank Westpac. The asset manager's shares increased by 1.8p to 155.3p, despite UBS cutting its target price to 155p from 170p.

Back among the blue-chip companies, Reckitt Benckiser continued to benefit from gossip emerging on Monday which suggested it could receive a possible approach from either Unilever – down 3p to 2,034p – or Procter & Gamble. The Cillit Bang owner jumped up 90p to 3,578p, meaning it has added nearly 4 per cent over the last two days.

Despite a sharp fall from a session high of 6,036.31 points, the FTSE 100 still managed to close 6.49 points stronger at 6,024.03 on what was its eighth straight day on the rise.

Marks & Spencer advanced 9.2p to 376p after Matrix's Tom Gadsby upgraded his advice to "buy" ahead of the high street institution's first-quarter trading update next week. Saying the recent poor performance of its share price had provided a "bit of weakness to buy into", the analyst added that recent comments from Debenhams – 0.95p ahead at 70.5p – and John Lewis meant the "mood music going into the ... statement is actually pretty good".

Meanwhile, Tesco and Wm Morrison put on 1.95p to 406.3p and 2.9p to 300.4p respectively after Bernstein's Christopher Hogbin chose the supermarkets as two of his preferred stocks in the European food retail sector. J Sainsbury also benefited, shifting up 4p to 334.2p, with Mr Hogbin saying that while the Qatar Investment Authority holds a 26 per cent stake, "it is difficult to rule out the possibility of another bid".

A fall of 53p to 1,910p left Intertek at the foot of the index , after Société Générale cut its advice on the testing equipment company to "hold". Saying it feared the group's consumer testing unit could fail to meet expectations in the short term, the broker reduced its target price to 2,100p from 2,240p despite conceding its "fundamental drivers ... are intact".

The miners were among the major fallers, ignoring bullish comments from Deutsche Bank which said the sector "does not often get much cheaper". The broker also described the second half of the year as having "the hallmarks of a strong performance environment", but Rio Tinto still dipped 58.5p to 4,478p while Kazakhmys dropped 11p to 1,384p.

Another in the red was Associated British Foods (ABF), as investors left the maker of Kingsmill bread 8p weaker at 1,078p after a profit warning from CSM, the world's biggest bakery products supplier. The Dutch group said its earnings for the first half of the year would be badly hit by the increasing price of raw materials, although Collins Stewart's Alicia Forry played down the read-across to ABF, describing it as "very limited".

Enquest Oil powered up 3.9p to 130.6p after learning oil companies operating in the North Sea will receive extra support following March's controversial tax hike. The Treasury is increasing a tax allowance that applies to the area, which Numis Securities's Sanjeev Bahl said would "[alleviate] some of the damaging effects of the tax increase".

Also helped by the news were the Alternative Investment Market-listed explorers EnCore Oil – up 9.5p to 71p – and Ithaca Energy – up 7.75p to 149p – while Norway's Statoil said it would restart preparatory work in the area.

There were a few huge movers among the penny stocks on AIM, including African Medical Investments which soared up 2.12p to 5p – a shift of nearly 75 per cent – after Peter Botha was appointed as its new chief executive and subscribed for $2m of new equity in the healthcare group.

Meanwhile, Croma charged forwards 0.6p to 1.83p following the announcement that its Photobase subsidiary has won a contract with CSS Total Security worth £450,000.