Market Report: Bullish broker sparks up British Energy

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The Independent Online

Corporate activity was thin on the ground as the market closed down on its last full session of the year. Yet one beleaguered energy stock rallied after a torrid few months as it received broker backing.

British Energy Group has endured a volatile year, but rallied 1.32 per cent to 535.5p yesterday after Goldman Sachs reiterated its "conviction buy" status, based on recent higher oil prices.

The company came off the rails in November after two reactors went down, and still hasn't provided a timetable for their return to operation.

The powerhouse broker said: "The current share price is discounting an aggressively negative output scenario and lower oil prices longer term."

On a weak day for the market, an oil exploration and production group also topped the risers. Cairn Energy made it to the summit of the leaderboard for the second day in row its third session since promotion to the top tier. It was bolstered 3 per cent to 3,090p as oil prices continued to surge, as the assassination of Pakistan's opposition leader Benazir Bhutto sparked geopolitical concerns.

The London Stock Exchange rose after releasing data showing it had attracted the most international listings of any world exchange this year. The LSE added 10p to 1,962p after it announced 86 foreign companies had floated in 2007, raising a total of 14.5bn. The NYSE recorded 33 non-US floats, raising 7bn.

The market failed to hold its gains for the first time in seven sessions. It stuttered in the wake of overnight losses on the Dow Jones Industrial Index, followed by the Nikkei 225. The Japanese index finished 11 per cent down on the year, the only major index, barring a collapse on Monday, to end in the red.

The FTSE 100 fell 61 points in early trading, but sparked a slight rally, ending 20.9 points down at 6,476.9 at the close. It was also dragged lower by housing data in the UK and US.

The Nationwide Building Society said house prices had fallen for the second consecutive month in December, down a further 0.5 per cent. But the sector rallied despite more bad news from the US. In November, it recorded the largest year-on-year drop in new home sales since 1991.

The housebuilder Taylor Wimpey, the worst hit in the morning, rallied from 5p down to 6.5p up at 656p. Another to reverse early losses was Persimmon, which closed up 1.33 per cent at 801p. This followed a note from Panmure Gordon downgrading Persimmon's forecasts for 2007 and 2008 to reflect its view "of weaker market demand". It did add that the group was the best quality business in the sector and maintained its "buy" recommendation.

The biggest faller on the day was Schroders, the asset management group, which finished 2.51 per cent down at 1,318p.

A raft of profit-taking hit the water utility groups after buoyancy the previous day. Most drenched was Severn Trent, which drained 1.45 per cent to 1,559p.

The most intriguingly worded RNS announcements of the day (amid little competition) came from Kesa Electricals.

The electrical retailer released a statement at midday, titled: "Possible sale of BUT". As the mind boggled, it turned out the group had entered talks to sell its French furniture and electricals business, BUT, for 550m (406m). The consortium put together to table an offer comprises Colony Capital, Goldman Sachs and Merchant Equity Partners. Kesa's BUT attracted enough interest to send the stock up 5.05 per cent to 234p, the third highest riser among the mid caps.

The highest was the new entrant International Ferro Metals, which strengthened 7.31 per cent to 113.75p on the back of strong commodity prices. Also up was Aquarius Platinum, 4.13 per cent to 579.5p. This follows the resumption of production at its Marikana mine in South Africa the previous day.

Some retailers had rebounded after losses on Thursday, with investors seeing a buying opportunity in Debenhams. The group, one of the previous day's worst performers, rebounded 3.63 per cent to 78.5p.

Northern Rock was back in familiar territory, hovering perilously near to its lows for the year. As continued uncertainty surrounded its future it fell 3.21 per cent to 83p. Collins Stewart also weakened further as its rumoured takeover appears to be no nearer. It fell 2.35 per cent to 166.25p.

The residential property lettings agent Direct Wonen was the worst small-cap performer after it released a profits warning in the morning. It slumped 26.32 per cent to 42p after revealing the outcome for the year would be "significantly below market expectations".

On the plus side, the digital advertising group Screen FX surged 12.5 per cent to 6.7p after it agreed to buy Screen Media Networks in an all-share deal.