Tesco was a talking point in a rising London market on Friday amid renewed speculation it could concede defeat in America.

A proposed change to liquor laws in California, the hub of Tesco’s Fresh and Easy division, could mark “the beginning of the end” for the lossmaking chain, MF Global analysts said.

A bill proposed by California Democrat Fiona Ma would ban sales of alcohol at self-service checkouts.

Tesco has 126 stores in California, accounting for nearly three-quarters of its US portfolio, and was the only grocer in the state to use self-service tills, MF analyst Mike Dennis noted.

Adding the extra staff needed to handle liquor sales would put more pressure on profit margins, which were already very weak because of high fixed costs and a reliance on discount vouchers, Mr Dennis said. He expected Philip Clarke, Tesco chief executive, to review the business this summer.

Tesco shares closed down 0.1 per cent at 408¼p – underperforming a broad market rally that followed US payroll numbers that beat market expectations.

The FTSE 100 bounced from two days of sharp declines to close up 1 per cent, or 56.79 points, to 5,976.77. The rally trimmed its loss for the week to 1.5 per cent.

Royal Bank of Scotland led Friday’s blue-chip risers, up 5.6 per cent to 42¾p, after its first-quarter results proved better than expected.

Miners tracked the copper price, which rebounded from a five-month low on the back of the US data. Anglo American took on 3.3 per cent to £30.43, Vedanta Resources rose 3.3 per cent to £21.94 and Xstrata was 2.3 per cent higher at £14.42.

Oil producers also found renewed support. BG Group, which posts quarterly results on Tuesday, rose 2.1 per cent to £14.35.

Arm Holdings – a stock that had been buffeted all week by theories about competition from Intel – rallied from an opening decline to close stronger by 4.9 per cent to 595p. The latest industry talk was that Apple, rather than switching its handheld devices from Arm to Intel as per a previous story, was now looking at switching from Intel to Arm in its laptops.

ITV rose 4.9 per cent to 75½p ahead of a trading update due Wednesday, which analysts have forecasted to be very weak due to a sharp decline in advertising sales over April.

“We believe ITV’s current share price has already factored in the worse-than-expected second quarter,” said JPMorgan Cazenove. The update “may be an opportunity to buy the stock as we believe the worse-than-expected second-quarter revenues for European free TV are not the sign of a structural change in the advertising recovery, but a blip,” it said.

Serco, the public services outsourcer, gained 1.9 per cent to 547p after a contract win with Australia’s prison service helped ease concerns ahead of a trading update on Monday.

Among the fallers, hedge fund manager Man Group lost 2.3 per cent to 247½p on expectations that the higher market volatility over recent days would be costly to AHL, its key fund. With AHL sitting just below the level at which Man could start charging performance fees, the stock tended to amplify the fund’s direction, analysts said.

Other money managers retreated in the wake of Thursday’s weaker-than-forecast figures from Schroders, down 1.2 per cent to £16.80. Hargreaves Lansdown lost 1.4 per cent to 609¾p and SVG Capital retreated by 1.1 per cent to 270p.

But Brewin Dolphin rose 3.3 per cent to 173½p after Peel Hunt started coverage with a 205p target price. It forecast continuing growth in assets under management to drive 18 per cent compound earnings growth over the next three years.

Short covering helped squeeze C&W Worldwide to the top of the mid-cap risers. The stock rose 6.2 per cent to 49¾p after a newswire suggested the telecoms group may be up for sale.

C&W’s network infrastructure, corporate clients and tax losses totalling £3.5bn may be valuable to a UK mobile operator such as Vodafone, said analysts. However, the attractions needed to be balanced by the company’s poor trading record and weak cash generation, they said. Vodafone fell 1 per cent at 167½p.

Cobham was up 2.1 percent to 225¼p on news it would dispose of its analytics and commercial systems divisions.

“Cobham is the European defence company that is best addressing a shrinking defence market,” said Citigroup, which added the stock to its “buy” list. “It is crystallising value for shareholders.”

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