HBOS speculation boosts Abbey

Mortgage bank Abbey National's shares rose 8.25p to 598p, the highest they have been since news of the bid from Spanish bank Banco Santander Central Hispano, amid speculation that HBOS might finally be getting closer to making a bid for its closest rival.

The lingering hope that a bid by HBOS might prompt an auction for the ailing Abbey, despite the fact that delays would be likely because competition regulators would investigate bids from large British banks, is continuing to support Abbey's share price.

The offer from Banco Santander valued each Abbey share last night at 574p - a total of £8.4bn - a little higher than of late because of an improvement in the Spanish bank's share price. The Spanish offer comprises one of its own shares and 31p in cash. Abbey's shareholders would like nothing better than an offer that gives them more cash as well as shares listed in London, rather than Madrid.

The recent falls in the price of oil did not ignite the FTSE 100 index, which fell 30.8 points to 4459 yesterday, despite the news being a good sign for the economy.

City sources said that the reason for the fall was pessimism over the macroeconomic picture after miserable data on consumer confidence and business performance from the United States. The FTSE 250 was not as gloomy, ending up 1.2 points to 6087.

Speculation that Amvescap was close to reaching a deal with the US securities and exchange commission over its investigation into market timing surfaced yesterday after three former employees reached a settlement with the regulator. The employees worked in its Invesco arm. Amvescap - which has delayed paying a dividend until the outcome of the case - fell 2p to close at 290p.

The share price of British Airways has been damaged by the rising oil price in recent months, as the cost of fuel has a big impact on airlines' profits. Yesterday's fall in the price of oil did not in turn boost BA's shares. The turmoil at the airline over the past two weeks, including lost baggage, threatened strikes and then chronic short-staffing leading to flight cancellations, cannot have helped sentiment.

BA is launching an investigation into the affair but it did not encourage confidence in the company yesterday. Its shares fell 4.5p to 244p.

Shares in pubs firm Enterprise Inns had a late surge to end up 16.5p at 547p, the biggest rise in the FTSE 100. The pubs sector has been hit hard by a Department of Trade and Industry select committee investigation into whether pub firms are exploiting their tenanted landlords. The market clearly thought the falls have been overdone yesterday, and Punch Taverns' shares rose 12.5p to 456p while Wolverhampton & Dudley rose 23p to 850p.

Retailer J Sainsbury fell 3p to 260.25p after credit rating agency Moody's cut its rating on the supermarket chain's debt and said its outlook for the firm was negative because of worries about continuing pressure on like-for-like sales and its ability to boost cashflow. It was also announced yesterday that value investor Brandes Investment Partners - the American firm known for its canny trading - reduced its holding in J Sainsbury by 0.2 percentage points to 7.86% last week.

Pharmacy chain and drugs distributor Alliance Unichem was the second highest riser in the FTSE 100 yesterday, up 13.5p to 673.5p.

There has been bid speculation surrounding the firm in recent months, particularly as chief executive Stefano Pessina is moving away from day-to-day management and he owns a third of the shares. Non-executive director Adrian Loader would not have been able to sell some shares early in August if he had knowledge of any bid.

The firm's shares are also much higher than the 500p level that attracted interest from private equity investors earlier in the year. The share price rise was linked to a switch to defensive stocks, and food manufacturers Cadbury Schweppes, up 6p to 445.5p, and Associated British Foods, up 7.5p to 625.5p, as well as tobacco firms Imperial Tobacco, up 14p to 1224p, and British American Tobacco, up 1p to 837.5p, did well yesterday.

Discount retailer Matalan rose as high as 211p on weekend reports that US retail group Wal-Mart was in town, investigating a possible bid.

Any deal would be a mere mid-morning snack for Wal-Mart but its potential bid targets are numerous, and it is linked with almost every underperforming retailer in Britain. Matalan has been reported as the subject of interest from private equity firms led by Stephen Sunnucks. The share price fell back to close up 6.5p at 206.25p.

New market entrant Virgin Mobile rose 7p to 200.75p on the back of weekend reports that Vodafone investigated bidding for the firm, although this was not confirmed.

Leisure firm Hilton Group ticked up 1p to 261p as several blue chip US investment banks commented favourably on its prospects for the year.

Goldman Sachs upgraded its profit forecasts for the year by 10% to £394m. This rise is not due to the hotels division, where there is uncertainty over the market, but to higher predictions in its betting arm and a lower debt interest charge estimate. It said the first-half results backed its view. Lehman Brothers and Morgan Stanley also boosted their forecasts.