Market Report: If it doesn't rain it pours on UK shares

Buy everything. Sell everything. The eurozone is rescued. It's doomed. Banks will be fine. They're all about to fail. That was a 10-second snapshot of a trader's brainwaves yesterday, on a day when the only constant in the City was rain.

While the deluge continued, Monday morning's shoots ofeurozone optimism dissolved into outright pessimism; the banks — which surged at the start of the week on hopes that the Spanish bailout might fix, well, everything — floundered as solid plans for a "Grexit" emerged, and anyone who failed to whip profits off the table on Monday had their head in their hands.

"People have woken up to the idea that the Spanish deal is only a short-term solution," said one City suit. "Everyone with half a brain grabbed yesterday's early gains as an opportunity to take a profit. I didn't."

Safe haven was the phrase. The defensive stocks were flying high, with fag firms dominating the benchmark index.British American Tobacco, maker of Lucky Strike, put on 45p to 3156p, while JPS firm Imperial Tobacco was close behind, up 28p to 2406p. Drugs were in favour too: pharmaceuticals giant GlaxoSmithKline put on 12p to 1451.5p as the market liked the sound of its £146m eczema drug purchase.

Dividend payers were also in demand, with Unilever, which is the world's biggest ice cream maker thanks to Ben & Jerry's and Cornetto, up 17p to 2055p, BP ticked up 2.55p to 417.45p and Vodafone was 3.65p higher at 174.7p.

Also surging ahead in the FTSE 100 was interdealer broker ICAP, up 9.2p to 346.5p, after analysts suggested it could do well out of a "Grexit".

David Lowery at Faraday Research said: "More volatility and uncertainty would lead to more trades, which in turn leads to more commission for the company. Right now looks to be the calm before the oncoming storm. With a potential spike in volatility just around the corner, ICAP is perfectly placed to see earnings and profits increase over and above current forecasts."

The FTSE rose just 41.37 points to 5,473.74 by the end of the day.

"Whilst Spain's news gave a glimmer of hope yesterday morning, later on the really intelligent people worked out it was just a pretty weak sticking plaster, and we decided to listen to them," one trader said.

Although Apple impressed techies with the new operating system and "retina display" laptop announced at the Worldwide Developers Conference in San Francisco, the lack of a major product launch gave chip designer ARM Holdings a kicking. The Cambridge company which makes Apple's processors had risen ahead of hopes of a big announcement, but yesterday lost 1.5p to 504p.

Both Glencore and Xstrata put on weight after Jefferies analysts said — in contrast to speculation that Ivan Glasenberg's group could have to shell out more cash to seal the deal — that the merger plans were likely to go ahead on their original terms.

Christopher LaFemina, Jefferies analyst, said: "We have become much less convinced that a bump is coming," flagging up a "recent deterioration of seaborne thermal coal fundamentals, significant earnings downgrade risk for Xstrata, geopolitical risk in Peru and Argentina, [and] the risk to Xstrata's copper growth pipeline," among other issues to have eased the pressure on Glencore to sweeten the terms of its proposed merger. Glencore was up 3.3p to 366.85p whilst Xstrata ticked up 8.4p to 970p.

Things have come to a pretty pass when just telling the market you won't be missing your forecasts boosts your share price. But that was the case for Premier Foods, the indebted Hovis bread giant whose shares have halved since late March. Yesterday they leaped a hefty 6 per cent, or 4.75p, to 91p, after the company issued a statement declaring that "full-year expectations for 2012 remain unchanged". So stop selling our shares. Now. Alternatively, consider its numerous refinancing efforts, the recent loss of its chairman and the risks involved with its restructuring programme and keep baling out.

Amlin, the biggest of the Lloyd's of London insurers, jumped 3.2p to 326.7p — its biggest rise in four months — after a chunky upgrade from Deutsche Bank analysts. Price rises for insurance premiums and better underwriting should set the firm fair after arguably taking on too much catastrophe risk last year — a painful mistake given that awful time for natural disasters.

Deutsche praises chief executive Charles Philipps for buying more reinsurance — just in case...

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