Market Report: British Energy powers up on surge of optimism

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The Independent Online

The last few weeks have been grim for shareholders in British Energy, the nuclear power generator. The company looks a dead cert to drop out of the blue chip index at the December reshuffle after it told the market a fortnight ago that it has discovered more cracks at some of its generators.

However, the company is due to update investors in mid-November about the cracks at its Hinckley Point B and Hunterston, and the word in the market is that the news will not be as bad as the most bearish traders believe.

Both generators are currently out of action and the stock has been held back because investors are concerned that the Government will sell all or part of its 65 per cent stake. However, traders are taking no news as good news and a sign that the Government will be hanging on to its stake in the business. The shares climbed 12.5p to 433p yesterday, and also benefited from about of short covering.

Rumours that Cemex will indeed bid for Hanson will not go away, and gained more momentum on talk that Rinker shareholders will reject the Cemex approach. Hanson shares have rallied from a recent low of 616.5p to close at 741.5p yesterday, up 15p and close to the all-time high.

Meanwhile, its rival Wolseley fell 33p to 1,206p as traders digested another set of weak US economic numbers. Wolseley derives 60 per cent of group profits from the US construction industry. Martin Slaney, of the spread betting group GFT Global Markets, said: "Everyone is genuinely worried about the possibility of a hard landing."

Despite the sector riding high over the last couple of years, investment bank UBS believes that there is still more upside left in the mining industry. The Swiss broker published a bullish sector review yesterday, upping its price targets on a number of stocks and urging clients to put more money into the sector. UBS rates Anglo American, 51p firmer at 2,415p; BHP Billiton, up 25p to 1,036p; and Rio Tinto, 79p better at 2,971p, all at "buy".

In the wider market, London shares closed well short of the 6,180.7 high but managed to hang on to some gains, as the FTSE 100 index closed 20.4 better at 6,149.6.

Carphone Warehouse was in demand ahead of today's third quarter numbers, as the influential broker Goldman Sachs upped its recommendation on the shares from "neutral" to "buy" on the back of recent weakness caused by Vodafone ending its relationship with the retailer. The shares rallied 11p to 294.5p.

The music publisher EMI Group edged 4.5p better in early deals before a bout of afternoon selling saw the stock close 2p worse at 267.5p. Some traders are convinced that the management is preparing a buy-out, and that the discovery of fraudulent accounting in Brazil last week was as a direct result of due diligence being conducted. Talk among traders is that a 320p per share offer is on the cards.

The online gambling group PartyGaming has attracted little in the way of support since its rival 888 Holdings confirmed that it is in merger talks, even if most traders believe that PartyGaming is one of its potential partners. One trader said: "If the two do merge it is a deal born of impotence rather than strength. Both companies may also live to regret their hasty exit from the US market, even if at the moment it looks like a lost cause." PartyGaming fell a penny to 29.5p, the worst performer in the mid caps, while 888 climbed 2p to 1,09.75p.

In the small caps SecureDesign, the first Japanese company to list on AIM, suffered another bout of profit taking sending the shares 15p lower to 120p. Although the shares have tanked in the last two weeks, falling from a high of over 200p, investors who bought at the initial public offering are still sitting pretty on a 155 per cent gain.

Oxus Gold bounced for the second session on the trot despite a recent back taxes ruling in Uzbekistan that may land the company with a $110m bill, more than the company is worth. Some chunky trades went though on the buy side of Oxus - one brave punter bought 2 million shares at 15.25p as the stock climbed 3.25p to 15.5p by the close.

Finally, KSK Power Ventur, a developer of power projects in India, enjoyed a strong debut on AIM.

The company raised £30.9m via a placing organised by broker Arden Partners at 107p. The shares closed at 115.5p, giving investors a 7.9 per cent premium and valuing the company at £148.8m.