Market Report: FTSE 100 registers tenth session of gains

The FTSE 100 maintained its winning streak last night, notching up its tenth consecutive session of gains despite a lacklustre start on Wall Street.

The benchmark almost gave way in the final hour of trading, softening as American indices turned lower. But index pared losses in the final half hour, closing up 16.81 points at 4576.61. Another day of gains will match the record set around the New Year period in 2004, when the Footsie registered eleven straight sessions in positive territory.

Although it closed in the black, the index was held back by a bout of profit taking, and news that UK GDP had contracted at a faster than expected pace in the second quarter of the year. Tim Hughes, head of sales trading at City spreadbetter IG Index, said that while the Footsie's ten-day run had given some succour to the bulls, sparking hopes an economic recovery may be on the horizon, "a chorus of dissent – suggesting equity markets are looking overbought – has begun to make itself heard". "Certainly the 4500 mark, a level that was pouring cold water over previous rallies, has not been a problem this time around," he said. "But investors will note these are still testing times for the economy at large. When trading resumes on Monday, there will be a strong temptation to book profits if there is a sense that this rally has finally run out of steam and the market looks set to turn on its heels."

On the FTSE 100, BP closed broadly unchanged, easing slightly to 510.9p, down 0.25p, as the market looked forward to its second quarter results, which are due next week. The wider sector was mixed against the backdrop of weaker oil prices, with the majors, including Royal Dutch Shell, up 4p at 1583p, and BG, up 22p at 1097, holding up well, but exploration and production companies, including Tullow Oil, down 11p at 978.5p, and Cairn Energy, down 18p at 2419p, easing slightly.

The banks supplemented earlier gains, rounding off a week which saw disappointing numbers from Morgan Stanley, but better than forecast second quarter results from Credit Suisse. Standard Chartered was the strongest here, rising by 3.3 per cent or 44p to 1360p, while Lloyds climbed to 77.99p, up 2.4 per cent or 1.8p, and the Royal Bank of Scotland gained 1.9 per cent or 0.775p to 42p. HSBC was also firm, rising by 1.3p to 574.5p, after Deutsche Bank upped its target price for the stock to 555p from 345p.

Deutsche also weighed in on Kingfisher, which closed flat at 209.5p. Following on from the retailer's second quarter update, the broker said Kingfisher remains its top pick in the general retail sector. Of the others, Citigroup raised its target price for the stock to 260p from 250p, HSBC moved its target to 211p, compared to 185p previously, while UBS moved its target to 210p from 195p.

Johnson Matthey rose to 1307p, up 27p, after Goldman Sachs removed the stock from its "conviction sell" list to reflect the company's better than expected first quarter update, but reiterated its "sell" stance, citing a lack of catalysts. "While we recognise [that Johnson Matthey] is a high-quality name on a long-term basis, we see limited upside potential to our mid-cycle discounted valuation based on 2012 earnings estimates," the broker said.

Back on the downside, Pennon, which fell to 466.25p, down 4.9 per cent or 24.25p, remained weak after HSBC moved the stock to "neutral" from "overweight", with a revised 510p target price, compared to 510p, on the back of Ofwat's recent pricing proposals. The broker also switched its stance on FTSE 250-listed Northumbrian Water, which was 1.8 per cent or 4.5p weaker at 241p after being moved to "underweight" from "neutral", with revised 250p target price, compared to 270p previously.

Over on the FTSE 250, which closed up 51.21 points at 7938.44, National Express rallied to 345.75p, up almost 7 per cent or 21.75p, after it emerged a consortium comprising the Cosmen family, which owns a major stake in the transport group, and the private equity group CVC Capital Partners was behind the recent, second bid approach.

Panmure Gordon, which raised its target price for the stock to 350p from 265p, said excluding any discount for the group's debt pile or the uncertainty surrounding the rail operations, it would value the business at just over 400p. "The Cosmen family, which already owns around 8.5 per cent [of the group], is in our view mainly interested in the Spanish coach operations," the broker said. "Some of the parts of the National Express group may be sold off, such as UK bus, and others may be retained by CVC."

Elsewhere, Aquarius Platinum was almost 3 per cent or 6.5p stronger at 238.5p, thanks to a Citigroup "buy" note. "With the platinum price around $1100 per ounce, it is pushing at the top end of the cash cost curve for the producers and, as such, we believe a floor price has been found," Citi said, adding: "We believe that improving car sales as well as the longer term trend of continued emission controls will provide a structurally sound demand environment for the platinum market."

The FTSE 100-listed platinum miner Lonmin was also strong last night, rallying by 3.8 per cent or 45p to 1243p.