Market Report: Hopes for profits send Wolseley higher

The construction materials group Wolseley saw its shares trade higher as the bulls, lured by hopes of a turning point in earnings, outflanked the bears last night.

The stock firmed up after Morgan Stanley raised its forecasts for the group for the first time since 2006, noting the evidence of better than expected cost savings in last week's unscheduled trading update.

"Earnings momentum had taken a steep downward trajectory since October 2006.... However, Wolseley is now showing signs of self help with profits beating expectations despite the continued difficulties in [its] end markets," the broker said, reiterating its "overweight" view and upping its target price to 1680p from 1650p.

Analysts at Royal Bank of Scotland, though similarly pleased with the company's cost efficiency drive, struck an altogether bearish note on the stock. Repeating its "sell" recommendation, RBS said that while the interim results later this month "may provide relative support to the group's share price", it considered "Wolseley more than fully valued given [the] risks in the speed and scale of recovery in the group's key US, UK and French markets, as well as the risks attached to the degree to which the business can recover without cost growth and inflation at least in line" with its forecasts. In the end, Morgan Stanley's view prevailed, with Wolseley closing 40p ahead at 1590p last night.

Overall, the FTSE 100, up 51.42 points at 5405.94, inched past the 5400-point mark, while the FTSE 250 gained 135.44 points to 9479.83. The benchmark was powered by the commodity issues, with miners rising as metals prices firmed on the back of worries that the Chilean earthquake may affect supply. Kazakhmys led the way, advancing by more than 5.2 per cent, or 69p, to 1410p, while Fresnillo rallied by 4.3 per cent, or 32p, to 782.5p and Rio Tinto, which said its divestment programme had passed the $10bn mark with the completion of the sale of its Alcan Packaging Food Americas division to the Bemis Company, added 104.5p to 3468.5p.

The strength in the heavily weighted mining issues offset the weakness in parts of the insurance and banking sectors. Prudential was 12 per cent, or 72.5p, behind at 530p after announcing plans for a mammoth cash call to fund its purchase of AIG's Asian life insurance arm for $35.5bn. In the wider sector, Aviva fell by almost 4 per cent, or 15.1p, to 375.2p as news of the AIG deal weighed against recent rumours that the Pru might join hands with Resolution to mount a bid for the group.

In the banking space, HSBC was 5.2 per cent, or 37.6p, lower at 682p after its annual results failed to impress. Standard Chartered, which is due to update the market later this week, also failed to make any headway, easing by 36.5p to 1525.5p.

On the upside, Tesco rose to 433.05p, up 13.35p, after JP Morgan abandoned its negative stance, citing the improvement in the supermarket giant's sales performance in the UK and internationally, and the prospects for free cash flow generation. Moving the stock to "neutral" from "underweight", the broker also acknowledged the broader economic picture, saying: "We have been turning more positive on the UK food retail market in recent months as the country has avoided the deflationary pressures affecting other markets that we feared last year."

British American Tobacco was also strong, adding 59p to 2288.5p, after Citigroup, pleased with the earnings growth in last week's results, raised its target for the stock to 2460p. "Once again, a tobacco company has shown that it can get pricing [power] at a time when few other staples companies are able to do so," Citi said, repeating its "buy" recommendation. "BAT management said there is no sign that the excellent pricing environment is weakening in any way."

Elsewhere, the IT group Logica was flat at 119.4p after KBC Peel Hunt said that 2010 "will not be a year of recovery in the pan European IT market". "The pan-European IT services market is suffering from structural overcapacity," the broker said, reiterating its "sell" recommendation on the stock. "This is driving the volume and pricing declines that characterised the market in 2009 and will likely characterise it going forward. Logica's consulting division is most exposed to these trends."

Further afield, Salamander Energy was 4.3p firmer at 254.4p after Morgan Stanley adopted an "equal weight" stance on the oil and gas explorer and producer. While acknowledging that Salamander was entering an exploration-focused phase that could offer a healthy upside to investors this year, the broker said it preferred the FTSE 100-listed Tullow Oil, which was 10p higher at 1199p, Soco International, which gained 36p to 1570p, and Afren, 1p weaker at 80.75p.

"Afren remains a top pick," Morgan Stanley added. "The recent concerns on liquidity and Nigeria are overdone in our opinion and, if anything, our conviction on our 'overweight' rating has increased as management delivers on the acquisition strategy and provides greater evidence of Afren's technical expertise in appraisal and development."

Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
ebookA unique anthology of reporting and analysis of a crucial period of history
Rhys Williams
commonwealth games
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment