Market Report: Sage storms up after broker's wise words

Sage Group was sitting pretty at the top of the leaderboard as the market closed for the bank holiday in positive territory.

The business management software group stormed up the risers after Merrill Lynch said the stock was undervalued. The US broker said the group was unlikely to be affected by the recent credit fears, and upped its rating from "neutral" to "buy," saying the second half of the year is seasonally strong for the group. It closed up 3.21 per cent at 233.25, although it is still a way off year highs of 277.75p in January.

The property investment and development company Segro, formerly Slough Estates, experienced a bit of la dolce vita after expanding into Italy. The group announced that it had bought a business park in Milan from Europa Capital. The deal, worth €84.5m, sent the shares up 2.5p to 531.5p.

Traders breathed a sigh of relief as the market closed up for the sixth day in a row, meaning credit fears didn't ruin their three-day weekend. There was little corporate news to drive movement, and, despite a few small swings, the top tier strengthened to close up 23.2 points at 6220.1.

Energy and mining led the index up, with BG Group up 2.74 per cent at 769.5p. Lehman Brothers released a note saying it was time to buy the European miners at the current prices, and put Xstrata and Rio Tinto among its top picks. It said underlying demand for commodities continues to be strong, and the slowdown in the US economy was unlikely to affect that. Rio ended the highest in the sector, up 77p at 3339p.

The financial sector was hit hard, especially the UK banks, which have endured a trying week. Standard Chartered slumped as speculation did the rounds that one of its structured investment vehicles, Whistlejacket Capital, was in trouble. The bank was quick to deny the rumours, saying there were no concerns over the $18bn fund. But the stock steadfastly refused to rally, finishing bottom of the pile, down 4.9 per cent at 1494p.

Elsewhere, the private equity company 3i Group took a 4.26 per cent hit, and the hedge fund Man Group was unable to maintain its rally as it shed 2.55 per cent.

Among the highest fallers on the FTSE 250 was Henderson Group, after it warned investors that the second half of the year would be much more challenging for fund flows. The shares fell 2.52 per cent to 135.25p, despite operating profit from all operations doubling in the first six months of the year.

Another company to suffer on the back of its interims was Spectris Group. Investors were keen to lock in profits after it reported a rise in pre-tax profits from £27.5m to £36.8m, sending the stock slumping 15.5p to 840.5p. The company, which makes precision instruments and controls, had leapt over 5 per cent the previous day in anticipation of the announcement.

Bottom-fishers were out in force as Assura Group soared 13.85 per cent to 160.25p, top of the second-tier climbers. Bargain-hunters piled in after the stock hit year lows of 140.75, more than £1 off its peak at the start of June. The company, formerly Medical Property Investment Fund, changed its name in October last year, and joined the FTSE 250 in December.

Among the small caps, Gem Diamonds rose 74p after a positive judgement by the FTSE Nationality Committee. Gem was formerly overlooked for a place in the FTSE 250 because it was registered in the British Virgin Islands, but has now been approved for UK classification status. The shares were up on expectation it will join the mid tier and be followed by the tracker funds for the first time. The stock has yo-yoed since listing in February, but closed up 66p at 1027p.

Top of the growth market was Surface Technology, which develops and applies surface coatings for a range of industries, after it accepted a buyout offer from Sumitomo Precision Products. SPP currently holds 62 per cent of the share capital, and the Surface board has agreed to recommend the full takeover, which values the company at £3.67m. The shares closed at the offer price, up 3.25p to 11p.

There was also no shortage of buyers for YooMedia after it agreed to provide remote payment services for Meteor Parking Limited, part of the largest car parking group in the UK. It closed up a quarter at 1p.

Finally, Ascent Resources was in the descent after it came away empty-handed from drilling a well. Shares fell 16.67 per cent to 17.5p, after it deemed its Arrone-1 well "not capable of commercial production".