Market Report: Global reach drives gains for International Power


International Power was on a firm footing last night as investors moved in on the prospect of gains following the power generator's investments in Latin America, the Middle East and other fast-growing energy markets which have keep it ahead of less nimble European rivals.

Collins Stewart said the main European power generators were facing threats from political interference and from the fact that "EU power plants are nearing the end of their natural life cycles, given that the last major investment boom in much of the EU" was in the 1970s and 1980s.

These challenges are leading to uncertainty and higher investment needs "just as the investment climate is deteriorating". International Power, however, has "limited exposure to the EU woes", it said.

"It has exposure to fast growing energy markets in North America, Latin America and META [Middle East, Turkey and Africa], where it enjoys a significant market presence," Collins Stewart analyst Harold Hutchinson explained, helping the stock firm up by 6.4p to 338.5p.

He also pointed out that the company's relationship with GDF Suez, which is the biggest shareholder following a deal earlier this year, meant that it was backed by a strong balance sheet. "The influence of GDF Suez helps support an investment grade rating for International Power," Mr Hutchinson added.

The power group's rise came against the backdrop of a general shift in sentiment across the market. Progress in Europe, with Greece officially welcoming a new Prime Minister and political moves in Italy to push through much-needed economic reforms, helped bring the bulls out of hiding and the FTSE 100 rallied by 1.85 per cent or 100.56 points to 5,545.38p. The FTSE 250 added 291.86 points to end the week at 10,389.3.

Nervousness was still evident, though, with volumes remaining low. "Traders remain cautious and are holding back [from] committing funds until further confirmation of sovereign debt problems being resolved," Manoj Ladwa, senior trader at ETX Capital, said.

The higher appetite for risk, however fragile, underpinned strength around financial sector stocks. The fund manager Schroders fared the best, taking the FTSE 100 crown with a rise of 6.8 per cent or 89p to 1,393p after Deutsche Bank abandoned its "sell" recommendation. The broker said the "tougher environment for fund flows and revenues has now been priced in" and upgraded the stock to "hold".

In the banking sector, Royal Bank of Scotland stood out, gaining 6.4 per cent or 1.35p to 22.46p, while Barclays rose by nearly 8.9p to 178.9p after announcing that its private equity business was being bought out by the division's management. Lloyds was around 6.1 per cent or 1.665p better off at 28.835p and Standard Chartered gained 12p to 1,402p.

HSBC, which has been lower in recent days after publishing its third quarter results, also managed to rise by 6.35p to 503.3p despite some bearish comment from Evolution Securities, whose banks analyst, Ian Gordon, told clients that "there is absolutely no excuse for owning the shares". "[HSBC] enjoys a premium rating, yet its outlook for return on equity is not materially superior to a UK domestic bank," he said, repeating his "sell" recommendation.

In the mining sector, steady commodity markets helped the copper producers Antofagasta, which was up 39p at 1,198p, and Kazakhmys, which was up 24p at 931.5p. The rise came as copper prices stabilised after falling on concerns about the debt crisis earlier in the week. "Over the past few weeks, industrial metals have been receiving conflicting signals. On the one hand, industrial metals' specific fundamentals such as inventory dynamics have been positive," Credit Suisse said.

"On the other hand, the macroeconomic environment has been challenging, with metals falling victim to the fallout of the Europe sovereign debt crisis and the general economic slowdown."

Further afield, Premier Foods continued the rally that started after it announced that its lenders had agreed to defer an upcoming covenant test as the food producer continued refinancing discussions.

Yesterday, it rose by another 40.3 per cent or 1.85p to 6.44p, with traders pointing to short sellers rushing to cover downside bets in light of the positive news. Premier was also aided by announcements of share buying by management. The performance took the total gains since the deferral announcement on Monday to around 90 per cent.

Fenner, the industrial conveyor belt manufacturer, was in demand, adding 5.1 per cent or 17.8p to 367.9p after Credit Suisse provided its shares with a shot in the arm. Responding to the company's recent full-year results, which showed rising profits, the broker reiterated its "outperform" stance and raised its target price for the stock to 415p from 395p.

FTSE 100 Risers

International Airlines 148.7p (up 7p, 4.9 per cent)

British Airways-owner rises after setting a new long-term operating profit target; savings from BA-Iberia merger expected to be higher than previously thought.

Anglo American 2,467p (up 83.5p, 3.5 per cent)

Rises with the wider mining sector; Deutsche Bank analysts revise their target price for its shares to 3,890p, up from 3,790p previously.

FTSE 100 Fallers

Burberry 1,377p (down 14p, 1 per cent)

Luxury goods group retreats on a bout of profit-taking following recent gains; even after last night's pullback, its share price records a positive week.

BG 1,366p (down 13.5p, 0.98 per cent)

Oil and gas group, which has interests in Brazil, eases on the read-across from Galp Energia's sale of a stake in its Brazil business to Sinopec for less than expected.

FTSE 250 Risers

Afren 85.8p (up 10.95p, 14.6 per cent)

Oil and gas companies with links to Kurdistan gain ground on reports that the US oil giant Exxon Mobil is set to enter the semi-autonomous region.

Spectris 1,336p (up 107p, 8.7 per cent)

Engineering group rallies after publishing a positive interim management statement; Altium Securities analysts reiterate their "buy" recommendation.

FTSE 250 Fallers

Betfair 758p (down 5.5p, 0.7 per cent)

Numis Securities switches its recommendation on the betting group's stock to "add" from "buy"; Davy lowers its view to "neutral" from "outperform".

Halfords 341.1p (down 0.5p, 0.2 per cent)

Credit Suisse reduces its target price for the retailer's shares to 400p from 465; HSBC, on the other hand, raises its target price to 365p from 350p.