Market report: Friday close

BID rumours continued to swirl around

The world's biggest and second-biggest banks, Citigroup and Bank of America, are in the frame to pounce on Barclays in what would have to be an agreed deal.

Some analysts are sceptical. Apart from solving Barclays' succession problem (chief executive Matt Barrett is due to step aside next year), neither deal looks compelling.

The cost savings from duplication were not that enticing, and either suitor would have a difficult job selling the deal to investors back home because of the necessity to write off tens of billions in goodwill.

Citigroup looks the better bet of the two because of its bigger financial firepower and greater overlap, which would give more scope for axing duplicated costs. Citigroup is already a major player in the UK with 9,000 employees while Bank of America has only 2,200. It has moved into retail banking in the UK once before, only to retreat.

The rest of the market perked up after a slow start. The FTSE 100 index rose 64.9 points to 4274, helped by bullish economic news from the US.

Philip Green and his adviser Merrill Lynch are said to be trawling around the venture capitalists looking to raise money for a major acquisition. Could it be Green's long-awaited bid for Safeway, up 4 1/4p at 292 1/2p, is on the way or has he switched his target to rival J Sainsbury, 1 1/4p dearer at 272p?

Legal & General has come out tops among British companies in a review of the European insurance industry by broker UBS. It rates the shares a buy and has set a target price of 155p. The group, which called on the City for almost £800m of extra funding last year, has been a steady performer of late, having bounced off its low of 60p in March. The shares today traded 1 1/2p better at 98 1/4p.

The broker says the macroeconomic backdrop for the insurance industry has improved markedly during the past six months as equity markets stage a rally. This has led to an easing of fears about insolvency levels. UBS now expects a recovery in life volumes led by the US, Italy and Britain.

UBS says L&G has the financial strength, product depth, breadth of distribution and momentum to maximise the benefits of any upturn. It remains neutral on rival insurer Aviva, 8p better at 494 1/2p, but has raised its 12-month target price from 480p to 520p.

Cable & Wireless was up 3 3/4p to 121p. UBS remains neutral on the shares but has raised its target price from 73p to 120p. Among second-liners, Invensys rose 2 1/4p to 31 1/2p in heavy turnover of 30m shares as US securities house Morgan Stanley began coverage with an overweight rating and a 38p price target.

AIM-listed Sportingbet fell 1 1/4p to 26p after taking some big hits on European league football and the NFL in the US. Sportingbet's dilemma has been created by the same teams continuing to win all their domestic championships across Europe.

Biotech specialist Alizyme rose 16p to 162p. The company has three drugs undergoing final Phase Three trials, and dealers say these are likely to be big earners. Alizyme is valued at £200m and speculators reckon it could attract the attention of one of the big drug companies.