Market Report: FTSE 100 soars on hopes for a happy new year

Investors bet on a strong performance by London shares yesterday in the run-up to the new year. The FTSE 100 soared to a four-and-a-half-year high, up 39.5 points to 5,587.4, as the bulls took control of the blue-chip index.

Analysts pointed out that all the factors that have moved equity prices higher over the past 12 months remain intact and are still very potent. These include corporate activity, share buy-backs and special dividends, and evidence that companies can still come out with positive surprises when it comes to earnings figures.

The mining sector was once again a top performer. Rio Tinto rose 57p to 2,621p, BHP Billiton put on 15p to 921p, Xstrata jumped 26p to 1,372p and Kazakhmys added 35.5p to 719.5p. Numis Securities raised its price target on Rio to 3,019p from 2,777p, arguing that more prices increases are on the way in the iron ore market and that this will boost earnings at the group.

Elsewhere in the FTSE 100, Compass dropped 3.5p to 216.25p after Citigroup sold 30 million shares in the catering company at between 216p and 218p on behalf of an institutional client. BAA, 2.5p higher at 638.5p, saw Margaret Ewing, the finance director of the airports group, make a profit of £100,000 by exercising share options. She used her right to buy 90,000 shares at 524p and sold them at 637p.

Dairy Crest added 19.5p to 536p as punters remained convinced a bid for the dairy group is on the cards from its French peer Lactalis. Hopes that a formal bid will soon emerge for the computer games maker SCi Entertainment pushed its stock 24p better to 615p. In October, SCi admitted to having received two takeover approaches. WH Smith retreated 6p to 414.5p on the back of a downgrade to "neutral" from "buy" at Citigroup. The US broker warned that heavy promotional activity at the retailer could depress profit margins this Christmas.

Benfield, which was boosted on Tuesday by rumours of a merger with Jardine Lloyd Thompson, gained a further 8.75p to 361p after Merrill Lynch increased its recommendation on the insurer to "buy" from "hold". Given the way the insurance industry is likely to go next year, the US broker believes Benfield is perfectly placed to cash in on this trend. Merrill remained a seller of Jardine, down 7p to 499p.

Nettworx, the new vehicle of Jonathan Rowland, who created and floated the internet incubator Jellyworks and then sold it to Shore Capital, raised £9.4m through a placing at 10p a share. The group plans to use the proceeds to invest in technology and telecom companies and saw its stock close at an impressive premium of 12.5p. MWB Business Exchange also enjoyed a strong debut. The business centre specialist listed at 80p, having raised £15m before expenses, and closed at 87.5p. The property group Marylebone Warwick Balfour, off 0.75p to 149p, holds a 68 per cent stake in the MWB, which is worth £41m.

Bioquell jumped 14p to 115p on news that the company's technology had been successful in eliminating superbugs such as MRSA. IndigoVision rose 52.5p to 322.5p after Oliver Vellacott, the chief executive of the video technology group, disclosed the purchase of 100,000 shares at 290p. There was also director share buying at Norish, 3p better at 60.5p. Ted O'Neill, the executive chairman of the food care group, picked up 40,000 shares at 62p.

Dawson International, steady at 8p, said the activist investment firm Guinness Peat had halved its stake in the company to 14 per cent. Bridgewell Securities tipped BTG, 3.5p higher to 219p, as being likely to secure a partner for its key Varisolve treatment for varicose veins in the next six months and urged its clients to buy into the biotech.

Lonrho Africa jumped 3.75p to 16.75p after a seller accounting for about 20 per cent of the company's shares was cleared from the market at a premium price of 15p. It is believed the stake was placed with a series of institutional investors and David Lenigas, who was named chief executive of the company yesterday. The group was once run by the tycoon Tiny Rowland but the sprawling pan-African empire he created - including businesses as diverse as mining, luxury hotels, car dealerships and pig farms - is long gone.

Lonrho is nothing more than a cash shell these days and when it sells its last hotel its reserves should stand at £23m, equivalent to 15p a share. The group boasts significant tax losses which it can use in the future to cut its tax bill. Mr Lenigas plans to turn Lonrho into an Africa-focused miner and he has plenty of exploration sector experience. He is on the board of Mediterranean Oil & Gas, Braemore Resources, Asia Energy and River Diamonds which, like Lonrho, are listed on AIM.