Market Report: Cobham, Ultra move up as Footsie bounces at last

With traders breathing a sigh of relief last night as the FTSE 100's losing streak was finally brought to an end, Cobham and Ultra Electronics were shooting up the mid-tier index after city scribblers said they were both well placed to weather the storm facing the defence companies.

The mood around the sector has been rather downbeat of late thanks to government penny-pinching across the globe, and the gloom intensified earlier in the month when the US signed up to cuts to its defence budget of at least $350bn over the next decade as part of the recent deficit reduction agreement.

Yesterday, however, some optimism emerged for both Cobham (up 4.4p to 181.3p) and Ultra (up 33p to 1,390p) as analysts said they were better prospects than their larger peers, thanks in part to their attractiveness as takeover targets.

Upgrading its advice on the two to "buy", Goldman Sachs praised their "strong niche positions" and said that as a result they "could, in our view, be acquired by larger defence companies." As well as talking up their dividend cover and balance sheets, the broker also pointed out that "while neither company is immune to defence cuts, both have a diverse contract exposure and are less vulnerable ifsingle large programmes are cut."

The analysts were less positive on BAE Systems, however, reiterating their "sell" recommendation and saying it has "poor growth prospects and will continue to earn below average sector returns". Société Générale did not help by cutting its price target to 280p from 360p, and the blue-chip group managed to edge forwards 0.2p to 256.2p only after a seven-day stretch in which it has lost nearly 17 per cent of its share price.

After seven straight sessions on the slide, in which it lost more than 800 points and fell to its lowest level for 13 months, the FTSE 100 finally managed to finish ahead yesterday despite briefly entering bear market territory in early trading as it touched a low of 4,791.01 points.

Spirits were raised by vague chatter that the US Federal Reserve – which was due to reveal its latest policy statement yesterday evening – could announce a third round of quantitative easing, and although market voices were refusing to get too excited over the talk, it helped lift the top-tier index 95.97 points to 5,164.92 – a swing of nearly 8 per cent over the day.

Key to the bounce were the miners, with Xstrata rising over 16 per cent from a session low of 900.4p to close 72.2p ahead at 1,042p. Meanwhile, Rio Tinto rallied 160.5p to 3,548p after Citigroup picked the company as one of its "conviction ideas", as the broker's analysts working out what risks were priced in after the sector's recent falls.

"We calculate that most outcomes are already in the shares, except a 'worst case' outcome where commodity prices fall to the same levels seen in the first-half of 2009", they said, adding that therefore there was "limited further downside".

There was no such advance for the banks, however, with Royal Bank of Scotland leading the way down. Driven back 1.05p to 26.21p, a new two-year low, Lloyds Banking Group – down 0.7p to 32.12p – was also weaker, although HSBC increased 7.2p to 545p.

The worst hit on the FTSE 250 was Greggs, after the baker revealed its first-half pretax profit had dropped by more than £1m to £17.3m, blaming trading conditions "more challenging than we had expected". The company, which said nearly 20 shops had been closed because of the previous night's riots, was downbeat on the chances of an improvement for the rest of the year, as it slumped 27.5p to 454.5p.

At the opposite end, Thomas Cook soared up 7.84p to 53.35p after losing nearly 16 per cent on Monday. Traders said the troubled tour operator was helped in part by a positive reaction to reports that one potential candidate to become its new chair is the current deputy chairman of Marks & Spencer (up 4.1p to 329.8p), Sir David Michels.

Elsewhere, vague speculation that, in the wake of the US group FISwithdrawing its approach last week, private equity could now make a move for the software company helped Misys shift forwards 9.5p to 258.7p.

Although the latest housing market survey from surveyors revealed the number of sales in July had hit atwo-year low, Barratt Developments managed to tick up 1.2p to 80.4p after Panmure Gordon said there was "evidence of good value within the quoted housebuilding sector" and that the group was its top pick among its larger peers. The broker also upgraded Persimmon's rating to "buy", as it closed 8.2p stronger at 393.8p.

Down on the Alternative Investment Market, the return of vague bid rumours around Berkeley Mineral Resources helped it rocket up 20 per cent, moving forwards 0.45p to 2.7p.

There was an even bigger surge of almost 50 per cent for Rockhopper, which shifted 68p to 209p after the Falklands oil explorer revealed positive results from an appraisal well.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most