Market Report: FirstGroup surge puts halt to month-long price decline

Investors rushing to get a ticket for FirstGroup sent the transport group surging on the mid-cap index yesterday, putting a halt to a near month-long price decline.

FirstGroup leapt 7.3p to 126.7p after train enthusiasts at Bank of America Merrill Lynch upgraded the company to a buy. The group was this week shortlisted for the TransPennine rail franchise and the bank thinks that it is likely to win either that or the upcoming East Coast franchise, providing a boost in the short term.

In the long term, analysts think a turnaround at its UK bus business and action to tackle its £1.7bn debt pile will make FirstGroup a smart buy now.

Model trains also had a good day – Charlie Caminada, a non-executive director of Hornby, threw his weight behind the model maker after its recent upbeat trading statement, spending almost £15,000 on shares. Hornby slipped 0.25p to 64.75p.

Debenhams was boosted by an upgrade from Cantor Fitzgerald. Its analyst Freddie George cut his profit forecasts for the department store, but said recent share price weakness means Debenhams, up 0.95p at 65.45p, is not expensive.

The FTSE 100’s five-day rally came to an end as central bankers on both sides of the pond indicated that interest rate rises could be closer than thought. Traders sought comfort in defensive stocks – United Utilities ended the day 14p better at 890p; SSE put on 12p to 1,517p; and Severn Trent gained 9p to 1,959p. The blue-chip index slipped 23.83 points to 6,755.48.

Gem Diamonds jumped 13.75p to 221.5p after revealing a 129 per cent surge in first-half profits to $19.7m (£12m).

The world woke up to brutality in the Middle East yesterday but for some investors the picture of the region looked very different. Gulf Keystone Petroleum, the AIM-listed explorer sitting on a potential 9.38 billion barrels of oil in Kurdistan, advanced 3.75p to 78.75p on reports that the pipeline carrying black gold out of the region is set to double its capacity.

Back office software specialist EG Solutions powered 17p higher to 71p, thanks to a new contract worth £1.2m with an outsourcing company.