Royal Mail was a faller on Tuesday after Morgan Stanley said next year’s earnings expectations look vulnerable.

“The decline in letter mail volume could accelerate on the back of weaker macro growth in 2015 and two fewer working days, and parcels revenue growth is still a challenge thanks to intense competition,” Morgan Stanley said.

“We remain concerned about the company’s ability to generate parcels revenue growth to offset the decline in letter mail. Additionally, our initial assumptions on further efficiencies in 2016 now look too generous.”

Separately, Dutch peer TNT Express posted earnings that missed forecasts and guided for 2015 to be “challenging year of transition”. Royal Mail closed 2.3 per cent lower at 437.6p.

Consumer staples makers were the wider market’s best performers, lifting the FTSE 100 by 0.6 per cent or 41.08 points to 6,898.13.

Diageo led the FTSE’s gain, up 2.5 per cent to £18.86. Nielsen Spirits Scanner data for January showed Diageo’s US sales up a sector-leading 8.7 per cent, from flat the previous month.

Currency printer De La Rue was up 5 per cent to 546.5p as day traders latched on to a revival of takeover speculation, with France’s Oberthur once again mentioned among the potential bidders. Oberthur abandoned a 935p a share offer for De La Rue in 2011.

InterContinental Hotels faded 1.7 per cent to £25.45 on in-line results. A stretched balance sheet means investors will probably have to wait until after the sale of its landmark Hong Kong hotel for their next cash return, analysts said.

Lloyds insurers gained after Brit confirmed a takeover approach. Fairfax of Canada agreed with Brit’s controlling shareholders Apollo and CVC to pay 280p cash and pay a 25p final dividend, which lifted the stock 11.2 per cent to 305p.

Novae, by some measures the cheapest of London’s listed Lloyds insurers, jumped 5.1 per cent to 635.5p and Beazley took on 1.2 per cent to 297p, but Lancashire lost 0.9 per cent to 637.5p on a Credit Suisse downgrade.

Gable, the small-cap specialist underwriter, rose 12.4 per cent to 50p on “buy” advice from Numis Securities.

Just Eat gained 3.9 per cent to 369.1p. Barclays started coverage of the takeaway delivery website with a 450p target price, equivalent to 77 times its 2015 forecast earnings per share.

“Recent consolidation has effectively created a European duopoly and this, combined with price inelasticity, should enable commission increases over time,” said Barclays, referring to deals by Germany’s Rocket Internet. “Clearly there is risk attached to this growth and valuation multiple, but Just Eat has a proven business model and a team which has executed well.”

Petroceltic rose 1.7 per cent to 135p after Dragon Oil said it was “aggressively pursuing” a development acquisition. Dragon, which has $2bn in net cash, will be free from early March to make another approach to Petroceltic, having in December abandoned a 230p a share proposal.

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