Market Report: Burberry luxuriates on hopes China will ease tax

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The Independent Online

Planning on buying your next handbag in Beijing? Well you may want to hold on a bit. As talk spread yesterday that the Chinese government could be about to slash its taxes on luxury goods, the prospect of consumer demand in the country rising even faster left Burberry as one of the Footsie's must-have stocks.

China's luxury market is believed to be worth roughly $30bn and growing rapidly all the time. Nonetheless, reports emerging from the country claimed a cut in import duties on upmarket goods could be on the horizon as its leaders attempt to boost domestic consumption.

Given the rapid growth it has enjoyed from China, Burberry is always sensitive to developments there and the latest news saw it race up 44p to 1,437p.

The fashion retailer (whose latest campaign stars Birdsong actor Eddie Redmayne) was also given a helping hand by Goldman Sachs' scribblers raising their target price to a huge 2,604p – not far off double where it currently trades.

If that wasn't enough, the analysts also reiterated their belief that Burberry could become a takeover target, although this idea is hardly a new one.

Having slumped more than 100 points on Tuesday, the FTSE 100 managed to make a slight recovery, bouncing up 25.61 points to 5,791.41. It would have been higher if a number of stocks were not trading ex-dividend, with Lucky Strike maker British American Tobacco (down 65.5p to 3,126p) and Irish building materials firm CRH (down 22p to 1,263p) among those losing their payout attractions.

Ahead of Carnival's first-quarter results tomorrow, UBS's analysts claimed the fact the announcement was earlier than usual showed the group was "ready to talk" about the impact from the Costa Concordia tragedy. Keeping their "buy" recommendation, they said there could be "some relief now that management will quantify the impact and put a floor on concerns", as the cruise giant powered up 32p to 1,876p.

Sainsbury's jumped 3.9p higher to 292.9p following the news that the investment vehicle of the Lebanese prime minister Najib Mikati and his brother Taha has raised its stake to over 3 per cent, with talk claiming they were attracted by its property portfolio.

After shocking investors with a profits warning last November, Admiral's final results managed to provide a positive surprise. The insurer shot up 104p to 1,144p – a move of 10 per cent – after revealing a forecast-beating 13 per cent rise in its full-year pre-tax profits.

The results of the latest indices reshuffle were announced after the bell, and as expected the recent rally by Hargreaves Lansdown – which put on another 2.7p to 461.8p – saved it from relegation to the mid-tier index. However, Cairn Energy (down1.3p to 319.7p) and Essar Energy (up 5.4p to 107p) will be moving down when the changes are implemented at the end of next week, with Croda International and Aberdeen Asset Management – who rose 42p to 2,149p and 6.8p to 246.6p respectively – taking their place.

Cable & Wireless Worldwide set a new six-month high by charging up 7.5 per cent to 33.55p off the back of reports claiming Vodafone (which stayed steady at 170p) is getting nearer to submitting an approach. The move came after the telecoms firm was hit by fears earlier in the week that the mobile phones giant could choose to not make an offer ahead of Monday's "put up or shut up" deadline.

Perform shifted 2.1p higher to 272.1p as Credit Suisse revived bid talk around the digital media group.The Swiss broker reiterated its belief that, thanks in part to the company's large portfolio of sports rights, Perform is "likely [to] attract potential acquisition interest".

Positive tests meant Afren was confident enough to announce that production at its Okoro East oil field in Nigeria should start in the "near-term", and in response, the explorer was lifted 3p to 174p.

It was a definite contrast to Faroe Petroleum, however, which slumped 5.01 per cent to 156.5p on AIM after failing to find commercial oil in its T-Rex and Bolan prospects in the Norwegian Sea.

Elsewhere among the oil groups, Red Emperor and Range Resources surged up 31.66 per cent to 32.75p and 8.33 per cent to 13p respectively following a positive drilling update from their joint well in Somalia. Meanwhile, tiddler Matra Petroleum crept up 0.01p to 0.86p despite vague speculation a discounted fundraising could be on its way.

On the small-cap index, vague rumours were suggesting Punch Taverns – which closed 0.5p better off at 11.25p – might become a bid target, with the pubs group's mid-tier rival Mitchells & Butlers (up 3.3p to 256.6p) put forward as one possible aggressor. However, the tale was being greeted with much scepticism in the Square Mile.