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Market Report: Footsie motors on despite eco gloom

This week's economic news has been pretty gloomy, but did nothing to dent bullish investors' desire for London's blue-chip index and it closed the week up 130 points, or 2.1 per cent.

News that the UK economy is flatlining didn't even stop it in its tracks yesterday, and the FTSE 100 index added another 19.54 points to close at 6,284.45, even after the UK's gross domestic product figures came in below expectations.

Some say that the fact the top-flight index bares little relation to the UK due to the proliferation of global companies which are listed here means local bad news is hardly noticed.

The falling price of sterling has attracted even more investors and their cash to London, and the index was up 6.5 per cent on the start of the year and has added more than 680 points – or 12 per cent since November.

Equities have been in favour following a series of healthier economic indicators – from debt agreements in Washington to the prospects of stronger Chinese growth, but London isn't alone.

The delayed reaction of institutional investors moving out of bonds and into equities has pushed indices higher across the globe.

London might look like it is flying but it is actually underperforming its global peers. Europe was helped up by better-than-expected German business confidence numbers yesterday and the US's S&P 500 was poised for an eighth day of gains – its longest winning streak in eight years.

Back in London, traders dampened some of the buoyant mood by pointing out yesterday's weaker volumes after Thursday's mad rush. The bulls may have run out of steam and one trader thought that some will look to take profit after the recent highs.

Even as the top-flight index flourished, miners were out of favour. But one stock bucking the trend was precious metals miner Polymetal International. Rumours on Thursday that it will merge with Polyus Gold, up 3p to 221.5p, were followed yesterday by a buy note from analysts at UBS discussing the "potential merger". They gave the shares a 1,300p price target and they glistened 26p to 1,116p.

British Airways owner IAG has managed to placate irate Iberia unions to negotiate a restructuring plan for its struggling Spanish airline.

There had been the threat of strike action, but earlier this month a five-year labour deal with unions was agreed. Further talks followed this week with unions still hoping to reduce lay-offs from the initial 4,500 to 3,800, but a meeting on Thursday is rumoured to have led to an agreement by both parties.

Analysts at UBS recently said the shares were the most likely European airline share to "outperform in 2013". Yesterday, JP Morgan Cazenove's skywatcher, David Pitura, said he is keen on the erstwhile "world's favourite airline" and upgraded his view to overweight – a buy – and said that the shares are "set for take-off on restructuring".

He said: "We believe the recent agreement by all of Iberia's unions to negotiate the terms of the plan with no change to the overall targets or timescales means this threat of turbulence has reduced."

Mr Pitura reckons IAG is trading "at a discount to peers", which he sees as "a good entry point for investors" and gives the shares a price target of €3.10 (261p) and a Blue Skies valuation of €4.85. They hovered up 4.6p to 223p.

IAG was joined at the top of the benchmark index by holiday group Tui Travel. The shares have had a bit of a bumpy ride over the past week; they were up by more than 4 per cent last week on news that its parent may look at a merger, but fell over 5 per cent when the talks ended. Yesterday they journeyed up 11.1p to 293.1p.

Shares in small-cap Siberian oil group Ruspetro jetted 2.62p to 49.5p after it offered senior secured loan notes to repay its Sberbank loan and said it will start up one of its processing plant again.

On AIM, China-based HaiKe Chemical's shares were adrift 4.75p to 18.25p as it revealed that it will post a full-year loss. The company blamed tough economic conditions and difficulties in domestic oil refineries across China.