Market Report: Centrica energised as rival raises prices

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Powergen, owned by the the giant German utilities group E.ON, plans to raise its electricity charges by 7 per cent and gas prices by 12 per cent to make up for rising prices in the energy and commodities market.

Investors knew that British Gas - still the UK supplier with the biggest number of gas customers - could not absorb these rising costs for much longer, but feared that an early move to pass the costs on to customers would backfire. Price rises last year sent thousands of British Gas customers into the hands of rival suppliers.

The introduction of higher prices by Powergen, effective from the 31 August, ought to ease the anger of British Gas customers, when the latest rises do come, and reduce the attractions of at least one alternative supplier. As a result, Centrica shares were up 5.75p at 230.75p.

The FTSE 100 swung in a range of more than 75 points, but settled at 5,221.6, up 6.4. Traders reverted to business as usual as soon as the limited extent of the damage from the new London bombings became clear. The index might even have ended substantially higher but for the disappointing start on Wall Street, which US traders attributed to caution in advance of a slew of financial results due in the next 10 days.

Mining stocks had been doing well before news that China was revaluing the yuan, making their dollar-denominated raw materials shipments into the country relatively more attractive. The strength of Chinese economic growth in the first half of the year - 9 per cent again - and of its latest industrial production figures ensures ongoing demand for raw materials. Anglo American was the best performer, up 35p to 1,373p, with Rio Tinto (up 24p to 1,862p) and Xstrata (up 14p at 1,162p) both hitting all-time records. BHP Billiton, which unveiled a £2.5bn joint venture to commercialise a new iron ore spit in Australia, was 10p firmer at 782p.

Saint-Gobain's bid approach to BPB, the plasterboard maker, recently promoted to the FTSE 100, gave a big boost to investor confidence, reminding them of their long-held view that more merger and acquisition activity is inevitable because of the cash building up on corporate balance sheets. One trader said: "After BPB, the next one to look at is Hanson, which is just about the last one left in this sector." The building supplier Hanson was up 14p to 547.5p; BPB was 136p higher at 648.5p.

Shares in Kelda, the company which owns Yorkshire Water, were bid up 12p to 693.5p because it will replace Allied Domecq in the FTSE 100 on 25 July. Shares in the spirits group, which is being acquired in a cash and shares deal by Pernod Ricard, were up 7p to 691.5p.

Better-than-expected consumer-spending figures for June eased some of the worst fears of a meltdown in the UK consumer economy. Indeed, yesterday Deutsche Bank added Next, the clothing retailer, to its "Pan-European Focus List" of favoured stocks. With retailing shares already depressed, interest rate cuts expected to pep-up demand soon, and a long stretch of warm weather likely to be helping most recent trading, Deutsche reckons Next's trading update at the interims in September will be a bullish one. Next shares were up 4p to 1,574p, and Hilton Group rose a ha'penny to 292p after also being added to Deutsche's focus list.

There were disappointing earnings statements from two mobile phone makers, Ericsson and Nokia, which knocked the components supplier Filtronic, which is trying to sell its phone antennae business. Its shares were 2p lower at 198p.

Russell Stevens, the chief executive and major shareholder of Meriden, a mini-management consultancy, sold a 3.8 per cent stake in the group for £92,500, cutting his shareholding to 44.2 per cent. Meriden's shares were unmoved at 1.17p.

And World Gaming, whose software runs online casinos and sports-betting services, has become the latest beneficiary of the stock market's mini-mania for all things to do with internet poker. The company, which floated in May, shot up 35 per cent yesterday morning, prompting the company to say it knew of no reason for the move. It is in talks to make acquisitions, a strategy outlined in its prospectus, but it is too early to say if they will lead to a deal. Nonetheless, the shares paused for half a breath, and ended up 40 per cent, 39p, at 137.5p. PartyGaming, the mother of all recent online poker floats, was down another ha'penny to 160p.