Market Report: Icap rises after it reassures worried City

Icap, the FTSE 100-listed interdealer broker led by Michael Spencer, was the strongest of the blue chips last night, swinging to 232p, up more than 12 per cent or 25.5p, on the back of a positive presentation in the City.

The company visited the sales team at Evolution Securities, reassuring them on the long-term prospects of the business, which, like the wider sector, has attracted concern owing to the ensuing market turmoil.

According to the broker, Mr Spen-cer acknowledged the challenges ahead, but said that "volumes are not falling off a cliff" – dealing head on with a concern which, given the slackening in market activity in recent months, has often been voiced by traders. He also reiterated the group's target of hitting £50m in pre-tax profits for the post trade services business by 2010.

"The potential bid for LCH.Clearnet [Europe's largest clearing house] is clearly also of significant strategic importance in the debate around centralised clearing of over-the-counter derivatives," Evolution analyst Hugo Mills said.

"The key challenge for Icap, in our view, remains retaining its margins in the face of falling volumes in 2010."

Overall, strong gains in morning trading were undermined by a lacklustre start on Wall Street. As a result, the FTSE 100, which touched an intra-day high of 3,884.06, relaxed to 3,848.98, up 32.54 points, by the close. The FTSE 250 proved more resilient, rising back above the 6,000-point mark, gaining 136.4 points to 6,042.15.

Real estate investment trusts were among the strongest, with Hammerson rising 7.4 per cent, or 23.2p, to 334p, after JP Morgan turned positive on the stock, moving its recommendation to "overweight" from "neutral". In other news around the stock, shareholders at an extraordinary general meeting backed the group's proposed rights issue.

Liberty International was also firm, gaining 12p to 328.5p before its preliminary results, which are due today. There some was speculation that the group might use the occasion to announce its decision on a possible capital raising.

The banks rallied on hopes for the Government's asset protection scheme, the details of which are expected to be rolled out today. Traders warned, however, that much hinges on the scope and the price at which banks can enter the scheme – if it is judged too expensive for the lenders, or seen as not comprehensive enough, the market might take a sharp turn southwards.

Royal Bank of Scotland, which is expected to outline the details of a sweeping restructuring plan with its results this morning, gained 4.5 per cent, or 1p, to 23.1p, while Lloyds Banking Group, which will publish its results tomorrow, was 6.4 per cent, or 3.5p, ahead at 57.4p.

HSBC, which is due to post results next week, was more than 4 per cent, or 20.5p, stronger at 492.5p. Morgan Stanley, which reiterated its "underweight" stance on the stock, said that although all the investors it had met "now fully expect a dividend cut at the 2 March results, with some also expecting a capital increase," it expects the banking group to hold back for now.

Elsewhere, rumours that a dividend cut might be in the offing were swirling around Marks & Spencer, the retail bellwether, which closed at 251.7p, 0.7p higher.

British Airways flew up 4.9p to 131.8p. The stock was fuelled by reports in the El Economista newspaper that the company would accept a 55 per cent stake in an enlarged group formed by the proposed merger with Spain's Iberia.

Rolls-Royce, 9.5p stronger at 289p, was lifted by UBS, which switched its stance on the stock to "neutral" from "sell", telling clients that it was raising its defined earnings estimates for the company by 21 per cent for 2009 and by 13 per cent for 2010 on the back of a better than expected outlook for the non-civil businesses and a "significantly better" currency hedging position.

In other broker-driven news, Go-Ahead, the mid-cap transport group, eased down 4 per cent, or 39.5p, to 935.5p, after Royal Bank of Scotland analysts reduced their target price for the stock from 1,220p to 1,055p.

Its sector peer National Express was also weak, losing 10.5p to 225p.

Morgan Sindall moved up 11.2 per cent, or 54p, to 533p, after Citigroup turned positive on the stock.

A short squeeze prompted by better-than-feared results from Barratt Developments was said to behind movements in the housing sector, with Barratt gaining 13.6 per cent, or 9.7p, to 81.2p. Its small cap peer Taylor Wimpey advanced to 17.2p, up 4.5 per cent or 0.7p.

Among smaller companies, the AIM-listed Pan African Resources rallied 10.3 per cent, or 0.3p, to 4p, after Ambrian weighed in on the company's recent announcement of a fire at the Consort mine in South Africa. The broker said that while the incident, which according to the company was caused by trespassers conducting illegal mining activity, was sad for those involved, it was not significant from an operational point of view and advised investors to "buy" the miner's stock.