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Market Report: IMI joins in Footsie's ninth day of gains

IMI rallied by almost 10 per cent as the Footsie registered its ninth consecutive session in the black last night.

Recent warnings from Charter and Bodycote have proved hard to bear for the engineering group, which has underperformed its peers over the past month; the other two have largely recovered, while IMI, which closed at 322.5p, up 29p, has lagged behind, "in anticipation of its warning", according to Bank of America-Merrill Lynch.

"We reduce our [full-year] forecasts [by] 13 per cent, and believe a warning has now been fully priced in," the broker said. "In the areas where there is read-across from Bodycote/Charter, we have adopted equally cautious top-line forecasts."

In fact, as the broker's forecast are at the low end of the scale, there are "risks of a positive surprise in every division". At the least, the upcoming first-half results should offer reassurance on restructuring, cashflow and the dividend.

Overall, the FTSE 100, up 1.5 per cent or 66.07 points at 4559.8, remained firm, recording its ninth consecutive session of gains. Early strength on Wall Street, which was buoyed by a positive report on the American housing market, helped to send the benchmark to its highest level since January. Another two sessions in the black will match the record set over the new year period in 2004, when the FTSE 100 notched up 11 positive sessions on the trot; the only other such instance occurred in 1997.

Although some traders were making bearish noises, wondering when the gains might give way, Citigroup sided with the bulls, saying that a combination of rising profits and cheap valuations should support reasonable equity returns throughout the second half of the year.

"Analysts are putting through more global earnings upgrades than downgrades for the first time since August 2007," the broker said. "Financial conditions and economic expectations are also improving. It all suggests we could be approaching the end of the global earnings recession."

Elsewhere, like the FTSE 100, the mid-cap FTSE 250 index was also strong last night, rising by 1.2 per cent or 93.18 points to 7887.23.

The mining sector recovered from Wednesday night's bout of profit-taking, with the Eurasian Natural Resources Corporation advancing to 860p, up more than 8 per cent or 70p, and Kazakhmys climbing to 811p, up 9.5 per cent or 70.5p. Anglo American was 5.1 per cent or 93p stronger at 1938p, while Xstrata rose to 778.9p, up 7.4 per cent or 53.9p.

Parts of the commercial property sector were weak, with FTSE 250-listed Derwent London, the central London-focused real-estate investment trust, falling back to 956.5p, down 7p, after UBS warned that the market may be discounting too rapid a recovery. The broker moved Derwent and FTSE-100 listed peer Liberty International, which was 4p heavier at 431.5p, to "sell", blaming both downgrades on valuation. UBS named British Land, which was 3.5p firmer at 412.25p, as one of its preferred plays in the European sector.

Severn Trent led the water companies lower, falling to 1032p, down 7.3 per cent or 81p, after Ofwat, the water market regulator, published its draft price determination, calling for household water bills to be cut in coming years. In the wider sector, Pennon was 3.4 per cent or 17p lighter at 490.5p.

Pearson was slightly lower at 623p, down 5.5p, as ING looked forward to the company's interim results, which are due on Monday. "We believe the outlook for US education will be far and away the most important catalyst," the broker said. "Given that the school sales season is just starting, management should be able to give early indications."

Further afield, National Express was in focus as the market digested the news – revealed after the close on the night before – that Firstgroup, which gained 2p to 346.75p, would not be making an offer, while a second, unnamed suitor had made an approach.

Recent market rumours have mooted the possibility of takeover interest from Stagecoach, although traders were divided on whether it would want to take on the entire group. One rumour doing the rounds last night suggested that Stagecoach may partner with a third party to mount a break-up bid. Panmure Gordon said that while the National Express share price looked appropriate at current levels, it may well trade higher in the near term, "especially as this second approach does not seem to have been immediately rejected by the board". At the close, National Express was 4.4 per cent or 13.75p ahead at 324p, while Stagecoach gained 2.3 per cent or 3p to 135p.

A downgrade by UBS, which switched stance to "neutral" from "buy", failed to derail Persimmon, which was 1.6 per cent or 6.75p stronger at 434.25p on the back of the positive US housing data, which gave succour to the bulls in the UK housing sector. Others, including Barratt Developments, which advanced to 187.75p, up 5.3 per cent or 9.5p, Redrow, which rose to 186p, up 2.2 per cent or 4p, and Bellway, which 1.3 per cent or 9.5p heavier at 720p, were also strong.