Market Report: Banks drive the FTSE 100 beyond 5,800

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The FTSE 100 closed above the 5,800-point mark for the first time since mid-2008 last night, with the banks offsetting losses in the mining sector.

HSBC rose to 712.5p, up 20.5p, Barclays added 9.65p to 383.15p, and the Royal Bank of Scotland moved closed to the Treasury's average buy-in price of 49.9p with a gain of 1.03p, to 45.95p. The move came on the back of better than expected results from JP Morgan Chase & Co, the American banking group, with traders citing the read-across to UK lenders, particularly Barclays, whose investment banking arm has a sizeable US presence. Analysts also did their bit to support the advance, with Execution Noble raising its Barclays fair value estimate to 454p from 386p and Exane BNP Paribas switching its sector stance to "neutral" from "underperform".

"A peak in bad loan provisions and persistently steep yield curves should continue to underpin the improvement in earnings momentum," Exane said, supporting sentiment across the sector, while Execution Noble suggested that Barclays's loan loss guidance for 2010 may prove "overly conservative given improving trends in unsecured loans and the recent UK credit conditions survey."

Overall, the banks drove the FTSE 100 to 5,825.01, up 28.76 points, while the FTSE 250 rose to 10,539.15, up 43.51 points. The gains were capped by the mining sector, which gave way after news of strong growth in the Chinese economy stoked fears of monetary tightening. Notwithstanding a fall in consumer price inflation, traders said Chinese central banking authorities may seek to curb the pace of growth as GDP expanded at a higher than forecast annual rate of 11.9 per cent in the first three months of the year. The worries prompted a round of profit-taking around miners, with BHP Billiton losing 19.5p to 2,266.5p and Anglo American falling to 2,970p, down 12.5p.

Rio Tinto, which issued an upbeat production update, was also lower, shedding 6.5p to 3,953p, while the Eurasian Natural Resources Corporation (ENRC) slipped to 1,232p, down 13p, despite some words of support from Citigroup. Factoring in new iron ore and ferrochrome price forecasts, the broker upped its earnings estimates for ENRC, saying the Kazakh miner was "likely to be an ongoing beneficiary of the cost pressures facing its competitors in the South African ferrochrome industry". Antofagsta, up 2p at 1,039p, was among the few that managed to make any headway.

Credit Suisse provided a shot in the arm for Inmarsat, the mobile satellite group, which added 9p, to 765p, after the broker raised its target price to 840p from 740p. "Inmarsat still faces low levels of competition in all of its core business divisions," the broker said, reiterating its "outperform" view.

Elsewhere, Credit Suisse raised its target for WPP, up 4.5p at 710p, to 830p, saying: "Company presentations at our global media conference last month indicated a 'LUV'-shaped advertising recovery, with Western Europe following a sluggish 'L'-shape, the US a healthier 'U'-shape, and emerging markets bounding right back in our 'V'-shape." Separately, the advertising group announced the acquisition of a stake in an ecommerce business.

Also on the upside, the cruise operator Carnival was strong, sailing to 2,693p, up 55p, after Morgan Stanley labelled the stock "an early play on [the] economic recovery". "Leisure demand is holding up better than corporate, with a 17 per cent average price increase on bookings in the nine-week period prior to the first quarter results," the broker said, reiterating its "overweight" view. "We see twice the upside to our 4,000p bull case than downside to our 2,000p bear case," Morgan Stanley added, raising its target price for the stock to 3,200p.

Michael Page International gained 5.9p to 442.6p after ING advised clients to "buy", saying that the market was underestimating the recruiter's "earnings power out of this recession". "Based on current fee earners, we estimate [that] Michael Page can generate 500 per cent more operating profit than reported in 2009 and around 20 per cent more than consensus for 2011," the broker said, abandoning its "hold" view and raising its target for the stock to 540p.

Further afield, Domino's Pizza UK & Ireland, which was hit after Panmure Gordon questioned the prospects for like-for-like sales growth earlier this week, rose by 7p, to 348p, after Numis came to its defence, saying that Wednesday's sell-off was "overdone". "Like-for-like sales are unlikely to weaken soon," the broker said, citing various factors, including the World Cup, that could boost growth in the second quarter. Numis added that while fuel costs were the only source of pressure, they were "relatively immaterial both to the company and franchisees". As for competition, Numis said the pressure was limited.

"Papa Johns is continuing to orientate any expansion away from Domino's stores and Pizza Hut has not picked up its expansion rate," the broker explained, repeating its "buy" view. "The average competing store is barely profitable, whereas the average Domino's franchisee made £520,000 profit after £300,000 of marketing and advertising spend last year."

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