Market report: Sainsbury soaring on buzz over bid by Qatar

The UK's third-biggest supermarket chain J Sainsbury put in a late spurt this afternoon as speculative buying pushed the price 14¼p higher to 333p.

City spivs say another bid, worth 500p a share, is being lined up for the company. They say the Qatar Investment Authority, which already owns 477 million shares, or 27% of the company, has been adding to its holding. Last year the QIA pulled out of bid talks with Sainsbury after failing to agree a price.

Traders just put it down to an old-fashioned bear squeeze. Turnover was lacking with just seven million shares changing hands.

Shares generally recovered from a lacklustre start with the help of strong opening gains on Wall Street this afternoon. City investors were forced to digest a long list of companies reporting that included Diageo, up 5p at 984½p, Kazakhmys, 34p lower at 1305p, Amec, 14½p better at 838p, and Premier Foods, down 5½p at 91¾p.

There were also concerns that Hurricane Gustav will disrupt oil supplies if it reaches the Gulf of Mexico. But those concerns were swept aside as the FTSE 100 index rose 63.3 points to 5591.4, while in New York the Dow climbed 96 to 11,598.5.

Financials underpinned leading shares with investors drawing strength from Crédit Agricole's better-than-expected results and talk of a major European buy programme. But dealers say it may be stretching a point to suggest this may signal the worst of the credit crunch is over.

Even so, HBOS advanced 12¾p to 306p, while Royal Bank of Scotland added 10p to 231¾p. But RSA Insurance led blue-chips higher with a rise of 6.9p to 152.7p on turnover of more than 16 million shares inspired by talk that it may soon become a target for Zurich Financial Group. The mutter from the gutter also claims Swiss Life may be looking for more acquisitions.

BT Group stood out with a leap of 6p to 171.3p after Goldman Sachs upped the shares from neutral to buy. They have underperformed the sector by 40% during the past year, and Goldman says their "beaten-up valuation" has tempted it to upgrade.

Takeover favourite ITV jumped 1.8p to 43.9p on revived speculative buying. One story doing the rounds claims German media giant Bertelsmann is looking for suitable acquisitions. City speculators asked themselves if it could be a buyer of part of BSkyB's 18% stake in ITV as the prelude to a full bid. BSkyB firmed 2½p to 458½p.

It's not the benefit of swingeing price increases that is likely to drive shares of our major utility suppliers higher in the months ahead, but takeover activity. Some of the valuations that are now being applied to the likes of nuclear power generator British Energy, down 6½p at 719½p, have given the City something to think about.

At least, that is the conclusion of Goldman Sachs, which has decided to increase the price targets of a dozen major players in the European utilities sector.

Among the UK companies getting the seal of approval from Goldman is International Power, 7¼p firmer at 396p, which has been taken off the broker's conviction sell list and awarded a neutral rating, with its target raised from 389p to 431p. It has also raised water supplier Pennon, unmoved on 629p, from sell to neutral with its target left virtually unchanged on 633p.

But United Utilities, off 7p at 714p, has been downgraded from neutral to sell along with Severn Trent, 33p adrift at 1372p, because their shares already discount any takeover action. National Grid, down 5p at 726½p, has replaced International Power on Goldman's conviction sell list with its target slashed from 728p to 648p.