Market Report: IMI flares up on shale gas boom

The shale gas boom in America's Midwest has been a boon to the Birmingham engineer IMI and news of its strong results yesterday helped it soar to the top of the benchmark index. IMI makes valves that control fluid flow in a host of products from drink dispensers and heating systems to nuclear plants, but the growth of the United States' shale gas sector has been a big area of expansion for the company.

It has been designing new valves for shale gas refinery customers and reported higher margins and improved first-half pre-tax profit. First-half figures recorded a 4 per cent year-on-year increase in pre-tax profits to £150.1m. It also said second-half trading is expected to be better.

Analysts at Citi rated it a buy with a 1,600p price target, up from 1,400p and said the group remained "well set to deliver attractive earnings … momentum and has further medium-term structural growth in sales and margins". Interest in the engineer pushed it to an all-time high – 82p better at 1,491p.

The world's largest plumber and builders' merchant was also helped by strong US sales. Analysts at UBS said Wolseley's American peers have shown that growth in the country could be in double digits for the past quarter, so its results in October are bound to be stellar. They recommended piling into the group ahead of this. UBS now forecasts 11 per cent comparable growth for Wolseley's US business in the fourth quarter against a previous 8.7 per cent forecast.

It rated it a buy with a 3,500p target, and said the company could even announce another special dividend of between £200m and £300m.

The building specialist is already up 13 per cent since mid-April but punters followed UBS' advice, and it gained a further 136p, or 4.25 per cent, to 3,330p.

The wider market was also in a good mood after better-than-expected manufacturing data from China and Germany. Despite no clear guidance from the US on slowing its money-printing, the FTSE 100 was 56.03 points stronger at 6,446.87 – the biggest one day rise since the start of the month.

Alastair McCaig, a market analyst at spreadbetting firm IG, said: "The FTSE 100 has managed to claw back all of its losses from yesterday, buoyed by a resurgent Asian market, which was boosted by Chinese manufacturing figures. It is beginning to look even more convincing that the Asian powerhouse is getting back up to full speed. The lack of any real developments in the US, in terms of the timeline for QE tapering, has seen discussions about this topic relegated into second spot." Miners were a beneficiary of the better data from China, the world's largest metals consumer. Mexican precious metals miner Fresnillo glistened 51p brighter at 1215p.

Mid-cap Premier Oil's first-half results didn't please the City. It reported a 10 per cent rise in first-half profits but some investors were concerned about its dependence on output at its Huntington field in the North Sea to meet full-year guidance. It was 10.5p weaker at 346.5p.

Analysts at RBC Capital picked Direct Line as their favourite UK non-life insurer. They predicted it has a chance to improve through cutting costs that had built up in the years it was under Royal Bank of Scotland ownership. RBC predicted the group, which also operates the Churchill insurance brand, will have "surplus capital" by 2015, which could be returned to shareholders. The car insurance specialist drove up 1.6p to 216.4p.

RSM Tenon went under yesterday after Lloyds Bank refused to let the accountant change the conditions on its £80m debt. Administrators from Deloitte, called in by the board, then immediately sold the business to rival firm Baker Tilly. Tenon shares were suspended at 1.13p and shareholders were wiped out.

The struggling Czech coal group New World Resources reported a wider-than-forecast loss of €315.4m and declined 3p to 71p.

Health property investor Primary Health Properties announced its 17th successive year of dividend growth, and said it lifted its rental income by 21.6 per cent to £19.7m at its half year, and it was 2p healthier at 337p.

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