Lunchtime market report

Mortgage bank Northern Rock was in demand this morning, helped by a buy recommendation from Deutsche Bank that suggests the bank's long-term prospects are undervalued by its share price.

There was also a hint of takeover talk, with Santander, owner of Abbey, in the frame. It was announced this morning that Abbey is in exclusive talks with Resolution to sell its UK and offshore life businesses to the insurer.

Dealers speculated that this would leave Santander in a good position to make further acquisitions, with Northern Rock looking like an ideal target.Northern Rock had risen more than 2% by lunchtime, while Resolution was up more than 7% at 674.5p.

Also in financials, Friends Provident was heading in the other direction. It lost 2.9% to 191.75p as Dutch financial services group Eureko sold 77.4m shares in the company - nearly 4% of the business - at 191p.

One of yesterday's big risers, mining group Kazakhmys, slipped 21.5p to 1173p. Broker Seymour Pierce said quarterly production figures were disappointing and put a sell recommendation on the shares.

Shares in the London Stock Exchange edged higher, up 1.5p to 1219p. Rival Euronext announced it was no longer in talks with the LSE about a bid, after America's Nasdaq recently snapped up a near 15% stake in the exchange. Earlier this morning, some 9.7m LSE shares changed hands at 1218p, with talk that it was one of the LSE's big shareholders deciding to sell as the chance of a takeover battle faded.

Among the many companies reporting today, discount retailer Matalan lost nearly 2%. Analysts at Seymour Pierce put a sell recommendation on the shares after full-year profits - down almost 30% to £56.7m - came in below their expectations. Charles Stanley followed suit with a negative note.Elsewhere, builder Crest Nicholson added 1.55% on hopes that a bid will come soon.

Finally, there was a new twist on broker Evolution's proposed takeover of rival Williams de Broe. This morning, five of Evolution's sales team specialising in small and medium cap companies reportedly resigned to join Cenkos, its recently founded rival.

Cenkos was set up about a year ago by Andrew Stewart - the original Stewart in Collins Stewart - and was named after his racehorse. The five defectors from Evolution look likely to have to indulge in a spot of "gardening leave" before joining Cenkos, and are believed to include Jeremy Warner-Allen, one of the founders of Beeson Gregory. Evolution, down 3% this morning, may be hoping the purchase of Williams de Broe can help fill the gap.