Market Report: FTSE 100 record run salvaged at 11th hour

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The Independent Online

The record attempt is still on ... just. The FTSE 100 was in negative territory with half an hour of trading left, yet by the close it had notched up its 11th straight rise, equalling the record.

Traders blamed the holiday season for a very quiet day on the floors with volumes of just 870 million. The top tier closed up just 0.21 per cent up at 4586.1 points as rally fatigue set in. One expert said: "It's running out of steam. People will be looking to take short-term profits."

The tranquillity in the Square Mile meant there was little to keep the gossips happy. There was talk late in the day of a bid for engineering group IMI, although price and bidder remained vague. The stock had jumped almost 10 per cent the previous week after support from Bank of America-Merrill Lynch, and closed up again yesterday, 1.2 per cent higher at 328.75p.

There was little in the way of firm direction for the FTSE 100 but it had been bolstered by the commodity majors in the morning. Pick of big oil was BP, which strengthened 8.1p to 519p. The miners were also strong, led up by Lonmin following support from Goldman Sachs. The broker called the group "the most attractive platinum stock" and raised its recommendation from "sell" to "neutral" after recent underperformance. The shares responded with a 4.67 per cent rise to close at 1301p.

It was a red letter day for the Pink 'Un's publisher, Pearson, which charged to the top of the blue chips on the back of unexpectedly good results. The publisher's bosses said trading was ahead of expectations as revenues improved in its educational books division, despite falls at Penguin and the FT Group. Analysts at Numis called the results "impressive". Investors agreed, with the shares storming up 12 per cent to 679p.

While the publishing group was the day's runaway winner, Lloyds Banking Group was also looking chipper with a 6.85 per cent rise to 83.33p, after support from the Japanese broker Nomura. Its analyst Robert Law raised his call from "reduce" to "buy" to reflect "our new focus on the current underlying operating cash flow ex-credit losses on Asset Protection Scheme assets". The group confirmed reports that Win Bischoff was to take over as chairman just minutes before the close.

It was a mixed day for the banks as Royal Bank of Scotland followed its rival up, closing 4.19 per cent up at 43.8p. This came despite Evolution putting 11 out of 19 banks on a sell rating with RBS a "core sell". Barclays, however, slumped 3.49 per cent to 304p.

Investors in Rexam turned into nervous rex yesterday as the stock slid all the way to the bottom of the All Share. This followed weekend rumours of a £350m rights issue, which turned out to be very much a reality. The company put out a statement saying that it had seen no upturn in trading since the first quarter. Despite cost-saving initiatives, the absence of an imminent upturn will hit its ability to generate cash to pay down debt, the group said. It added that the possibility that its credit rating could be junked was "unacceptably high" – adding up to £12m a year in interest – and the group was considering its options. Paul Checketts, an analyst at Oriel Securities, said: "The fact this is even being considered is a sign the company is more distressed than previously believed." He added that the dividend "cannot conceivably be paid". The stock shed 12 per cent to close at 284.5p.

British Airways was grounded in anticipation of its trading update this week, especially as Ryanair warned that lower fares would drag its full-year profits to the bottom of the range. BA ended 3.36 per cent lower at 132.3p.

Top stock of the day in the FTSE All Share was Findel, the home shopping, education and healthcare group which stormed up 50 per cent as investor fears over its financial position receded. The group said on Friday it was to raise £81m in a share placing, and Seymour Pierce yesterday backed the move as potentially salvaging the group. It ended the day up 33.9 per cent at 35.25p.

Elsewhere among the small caps, Nighthawk Energy continued to strengthen after its fundraising on Friday. A stock that has an average volume of about 1.5 million was comfortably through 10 million yesterday. It was changing hands at 44p yesterday, up 12.1 per cent on the previous close and 9p above the price for Friday's issue, which raised £22.4m.

Traders pointed to a resurgence of smaller gold miners. One said: "As the market drifts back, and the enthusiasm for equities wanes, gold is seen as a safe hedge." The AIM-listed group EMED Mining supported the theory of an appetite for the sector as it raised £2.9m to pay off debt and expand.

On the downside, Filtronic was hit as weak demand pushed its full-year operating profit down. The group, which makes parts for wireless systems, fell 9.5 per cent to 33p.

Total Systems, another technology company but one concentrating on the insurance industry, also took a hit yesterday. It fell 6.3 per cent after warning the market that its order intake had spiralled lower. Its chief executive, Terence Bourne, said the situation was unlikely to turn around before the end of the year.