Market Report: Image is all as Burberry shoots up the Footsie

  • @greentoby

It may not be the height of fashion for investors in the Square Mile at the moment, but Burberry is still very much in vogue with shoppers. Shares in the luxury brand were flying off the shelves yesterday on evidence that the popularity of its trench coats and handbags is continuing to grow.

Since reaching an all-time high last July of 1,600p, the group has failed to move above that. Last night, however, it closed close to the top of the Footsie after Credit Suisse upgraded its advice to "outperform" following a survey of 20 of the world's most upmarket department stores.

Scribblers from the broker noted that, compared to last year's results, an increasing number of respondents believed the image of Burberry – at one time more linked to football hooligans than fashionistas – was now at least at the same level as brands such as Louis Vuitton or Chanel.

At the same time, nearly half of those surveyed said they expected Burberry to perform better than its luxury rivals while all planned to either increase or keep steady the amount of space in their stores dedicated to its products. These findings, said the analysts, suggested "sustained, top-line outperformance" for the group, adding that it looked "healthier than ever".

Burberry's response was to shoot up 68p to 1,392p, with the move coming amid the revival of speculation it could become a bid target. Credit Suisse's scribes believe its 100 per cent free float meant there was a "potential takeover risk", although traders, who have heard the idea many times, were unimpressed.

Considering the boom in growth it is enjoying from China, Burberry will not have been harmed by the shock decision of the country's central bank to cut interest rates in an attempt to prop up growth.

It meant the lack of activity from the Bank of England was forgotten as the heavyweight miners charged up on the news. Rio Tinto and Xstrata raced up 115.5p to 3,015p and 28.2p to 966.8p, helping the FTSE 100 rise 63.68 points to 5,447.79, although US Fed boss Ben Bernanke, playing down hopes of stimulus measures, dampened the mood late in the day.

Having watched Glencore reach an all-time low of 334.35p last week, the trading giant's boss, Ivan Glasenberg, has decided to give it a push. The group revealed he has spent nearly £10m on almost 3 million shares, raising his stake to 15.8 per cent.

Given a lock-up expired last month on employees' shares – including some of Mr Glasenberg's – traders were encouraged by the fact he was buying instead of selling. The chief executive had promised to spend a "substantial" proportion of the recent £70m dividend he received on shares.

The vote of confidence helped lift Glencore 13.45p to 361.2p, while it was also helped by the news that Australian regulators have approved its takeover of Canadian grain giant Viterra.

Tullow Oil spurted up 30p to 1,468p after revealing it had struck oil off the Ivory Coast, giving a boost to the explorer's hopes of finding black gold in other nearby prospects.

Diageo slipped 4p to 1,577p as Liberum Capital's Pablo Zuanic suggested it may need a name change in order to achieve its goal of taking control of the world's biggest tequila brand, Jose Cuervo. "Sealing the deal may be as simple as buying shares back to pay [Cuervo owners the Beckmann family] and rechristening Diageo," said the analyst, who suggested "The Johnnie Cuervo Walker Co".

On the FTSE 250, Kesa Electricals powered up 4.24p to 54.1p following promising sales data from the high street. Fund manager Schroders has raised its stake in the retailer, which will be relegated to the small-cap index at the end of next week, to more than 11 per cent.

A rather busy session left Synergy Health 40.5p better off at 864.5p. As well as publishing its full-year results, the sterilising equipment supplier also announced a share placing and revealed it had struck a $25.1m (£16.3m) deal to buy US rival SRI/Surgical Express.

The widespread rally was accompanied by gossips reheating a number of familiar bid tales. Chip designer CSR (6.4p better off at 208p) and iron ore producer Ferrexpo (7.8p better off at 207p) were among those once again finding themselves the subject of takeover speculation, although dealers were playing it down.

Down on Aim, Ithaca Energy shifted up 5.75p to 115p on the start of oil exports from its Athena field in the North Sea. The explorer remains more than a third lower than before its admission last week that takeover talks had ended without a deal being struck – some, however, still hope it could receive a hostile approach.