Market Report: FTSE 100 touches new high for the year

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The FTSE 100 index of leading shares registered a new 10-month high last night, briefly breaching the 4,900-point mark before closing at 4,896.23, up 45.34 points.

The benchmark rose as traders spoke of growing optimism following Federal Reserve chairman Ben Bernanke's comments last week that prospects for a return to global economic growth looked good in the near term. Overnight gains in Asia underpinned sentiment in early trading, while a positive start on Wall Street lifted the mood in the final hours of trading in London. Although the index failed to close beyond the 4,900-mark, many in the market remain optimistic about the road ahead.

"We've seen various potential psychological barriers tested and broken fairly unceremoniously of late and, while we may see an element of profit-taking over the coming days, there seems little reason to doubt the Footsie's ability to continue to the 5,000-mark while the economic backdrop continues to brighten," Tim Hughes, head of sales trading at City spread betting firm IG Index, said. "With the optimism today extending from Asia, through Europe and – in early trading at least – on to Wall Street, further gains seem pretty likely in the medium term."

The heavily-weighted mining sector, which stands to the gain from the prospective uptick in demand if a recovery does indeed take root, aided the advance. Copper producers were amongst the strongest, with Kazakhmys rising by 5.8 per cent, or 53.5p, to 980p and Antofagasta gaining 4.3 per cent, or 33.5p, to 814p. The platinum miner Lonmin was also strong, advancing to 1,539p, up 3.4 per cent, or 51p, as was Fresnillo, the Mexican silver producer, which climbed to 639.5p, up 3.1 per cent, or 19p.

In the banking sector, a growing appetite for risk drove the Royal Bank of Scotland, which gained 6.8 per cent, or 3.27p, to 51.75p, past the average price of 50.5p per share at which the Government acquired its stake. Lloyds was 6.3 per cent, or 6.39p, heavier at 107.97p – well below the average price of around 120p per share that the taxpayer paid for its holding.

HSBC failed to make much headway, closing 5p ahead at 664.1p, after Bank of America-Merrill Lynch moved it onto its "least preferred list" of banking stocks.

"We recently [upgraded] HSBC to neutral and, indeed, we see little reasons to be short the stock," Merrill said. "However, on a month view we don't see an obvious catalyst and, in the absence of a catalyst, we think HSBC's lofty valuation makes it unlikely that the share price will outperform."

Elsewhere, the advertising group WPP gained 3.8 per cent, or 19p, to 523.5p after the Royal Bank of Scotland upped its target price for the stock to 550p from 475p. The stock also benefited from some words of support from Deutsche Bank, which said that while the upcoming results were likely to be weak, this was priced in at current levels.

"Relative to Omnicom, WPP's global peer, the [price to earnings multiple] is at [more than a] 30 per cent discount – this is as wide as it has been for five years," Deutsche said, upgrading the stock to "buy" from "hold". "Based on historic trading ranges, we see this level of discount to Omnicom, in particular, as overdone and due for correction on the upside."

British Land, up 3.2 per cent, or 15p, at 484.9p, was buoyed by UBS, which raised its target price for the stock to 450p from 370p to reflect the improved commercial property outlook. "The group's high gearing and relatively high property, earnings and dividend yields mean that it remains one of our favoured stocks in the sector," the broker said, sticking to its "neutral" stance.

On the second tier, Intermediate Capital was almost 9 per cent, or 23p, heavier at 293.9p after Credit Suisse reinstated coverage on the stock with an "outperform" recommendation. "The rights issue raised £351m of new equity which in combination with the [around] £265m of undrawn facilities gives around £616m of capacity for growth, significantly relieving our prior concern on the group's constrained ability to fund growth," the broker said, setting a 365p target price.

Rightmove, which rallied strongly after impressing the market with its results last week, climbed by another 3.8 per cent, or 19.5p, to 528p after Numis moved its recommendation to "buy" from "add", with a revised 527p target price, compared to 457p previously. Both changes were down to the broker revising its forecasts in light of the results. For this year, Numis now expects Rightmove to report £38m in pre-tax profits, compared with £32m previously. For 2010, the figure is now expected to swell to £45m, compared to £34m previously.

Also on the upside, the housing sector was strong following interim results from Bovis Homes, which rose to 553p, up 15.5p, after saying that the housing market had shown "signs of stabilising" during the first half of the year. The news cheered the likes of Persimmon, which rose 17.5p to 518.5p ahead of its results this morning, and Barratt Developments, which climbed to 245.7p, up 8.4p. Redrow was 11.5p heavier at 227.5p, while Bellway closed 26p stronger at 864.5p.

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