Market report: Monday close

STRUGGLING supermarkets giant

The shares jumped by more than 2% but ended the day 2 1/2p lower at 260 1/4p, as investors dived in, making Sainsbury among the most sought-after blue-chips.

More than 25m shares changed hands by mid-morning as the market weighed up the probability of a bid.

Permira was said to be in talks with other financial backers and to be looking for a management team. Managing partner Damon Buffini was named as the bid mastermind. However, with 35% of the shares owned by various Sainsbury family members, the pivotal issue is not whether anybody wants to buy it but whether the family is willing to sell.

If next month's trading update is as dire as some analysts are indicating, the sellers may strengthen their argument.

After a weekend of oleaginous tributes to Tesco's money-making abilities, a relatively minor deal (for Tesco) today revealed how the supermarkets powerhouse can have an instant impact on other companies' shares.

Aim-listed, loss-making Pixology and Photo-Me International saw their values rise after they announced a deal with Tesco for supplying 165 digital photo kiosks to the chain. Photo-Me was 1 1/4p lower at 105 1/4p while Pixology, which makes the software for developing digital photos, was 4 1/2p stronger at 111 1/2p. Pixology confidently predicted a glowing future for itself as the traditional photographdeveloping market declines by 25% a year.

Shares edged slowly down as fresh fears about the impact of rising oil prices on the global economy depressed investors.

The FTSE 100 index was down 38.9 at 4541.2 with just a handful of blue-chips showing gains.

Hanson was the highest climber, up 12 3/4p at 403p, as investor sentiment toward the building industry was boosted by the £2.3bn bid for RMC by Mexico's Cemex.

According to United Utilities, up 1 1/2p at 546 1/2p, the concessions granted by electricity regulator Ofgem to the industry today over its rules for price rises in the next five years did not go far enough. Ofgem added £95m a year at today's prices to United's permitted price rises but the Manweb owner said its assumption of a 4.6% return was still not adequate to compensate investors for the risk. Final rules will be published in November.

Reuters was among the steepest Footsie fallers, down 10p to 316p despite a buy note from CSFB showing the company trading at a 15% discount to its peers.

Land Securities slipped 17p to 1183p in reaction to its debt renegotiation plans.

Mid-cap shares fared better, buoyed by bid speculation over MFI, up 5p at 107 1/4p, as well as the RMC-Cemex deal, which saw the cement company rise by 252 1/2p to 851 1/2p. Moneybox, which charges customers who withdraw cash from the thousands of machines it operates in out-of-the-way places, was 4 1/2p higher at 34 1/2p after confirming that it had received a number of bid approaches.

Expect glum faces at Toad, down 4 1/4p at 11 1/4p, after the in-car gadget maker moaned that better car security had harmed sales of replacement radios and warned that profits will be below expectations.