Market Report: Imperial rises as plain packaging fears subside

Imperial Tobacco was among the main blue-chip risers yesterday, as the cigarette manufacturer was given a vote of confidence over potential legislation that may force its products to be sold in a plain packet.

It was revealed last Tuesday that the Government will consider a ban on branding as a way of making smoking less attractive. If such a ban is introduced, the UK will follow Australia, where legislation against logos and colour on packets is expected to be implemented from 2012.

Calling it "the elephant in the room", Evolution Securities said it believed plain packaging "may become the hot topic in the sector in 2011". Yet its analysts were fairly relaxed about the effect on Imperial, whose products include Davidoff and Lambert & Butler.

The broker described Imperial as "well placed", partly because of its relatively low exposure to emerging markets – "where smoking is often aspirational". Evolution added that "existing committed smokers in mature markets ... are likely to continue to buy their preferred brands".

Although it is currently the Australian and UK markets where the measure is most likely to be brought in, Evolution said that "once a precedent has been set, other countries across the world typically follow suit". It therefore kept Imperial as a "buy", and the company closed the session 19p stronger on 1,893p.

Initial trading saw the FTSE 100 stay relatively steady until disappointing payroll data from the States caused stocks to plummet in the afternoon. However, a partial rally in the last few hours before the bell meant it finished just 22.24 points down on 5,745.32.

The miners were among the main risers, with Fresnillo topping the index as the gold and silver producer shot up 60p to 1,568p. Close behind it was Johnson Matthey, after the platinum processor advanced 59p to 1,926p as a result of Liberum Capital reiterating its advice to "buy".

Analysts from JP Morgan Cazenove were talking up the prospect of mergers and acquisitions in the European beverages sector, and the investment bank picked out SABMiller for a special mention. The broker said it could see a "a full combination with Castel/BGI in Africa" for the Grolsch-brewer, which "would be very attractive strategically". The suggestion did not exactly spark the imagination of investors, however, as the beer giant edged up 12p to 2,137.5p.

A note on UK asset managers from Numis signalled bad news for Man Group, which was downgraded to "reduce", causing the hedge fund manager to slide 9.6p to 279.1p. Still, the broker was relatively positive on the sector, saying that "for investors concerned about inflation, we believe the asset management sector provides an excellent inflation hedge".

Another faller was BAE Systems, despite the defence company claiming late on Thursday that there was a lot of interest in its Platforms Solutions business. It ended the session having dropped 4.6p to 326.2p, its price weakened by a key Pentagon official talking publicly about how defence expenditure in the States is likely to fall.

A positive update from Berkeley gave hope to its housebuilder peers on the FTSE 250; first-half pre-tax profits were up nearly 20 per cent to £61.6m, causing prices to jump 38p to 878p.

Arbuthnot's Kate Moy said the figures "are a reflection of the underlying resilience of the housing market in London and the South-east", adding that it was a good sign for both Bellway and Barratt Developments, which made 9.5p to 555.5p and 4.5p to 78p respectively. Taylor Wimpey was also going strong, as it added 1.03p to close on 26.4p.

Goldman Sachs initiated coverage on Imagination Technologies – whose technology can be found in Apple's iPhone – and placed the chip maker on its "conviction buy" list. The broker said that the company "offers prime exposure to some of the fastest growing technology end markets", as it put on 22.8p to 399.8p.

Premier Foods, which confirmed that it is close to selling its Quorn brand, was knocked back 0.43p to 18.13p. After reports earlier in the week that Nestlé was involved in discussions, Premier said yesterday that "advanced" talks over its meat-free unit were taking place with two interested parties, although it did not specify which they were.

Amid the small-caps, there was a massive rise for Lavendon, which moved 24p higher to 102.34p after announcing it had rejected an 111p-a-share offer from the Belgian company TVH. Meanwhile, a profit warning from Promethean World saw the interactive whiteboard-maker plummet 25.75p to 52p, a fall of over 30 per cent.

On the Alternative Investment Market, Dominion Petroleum enjoyed a big move towards the top as its share price was driven up 1.23p to 6.23p. Investors' interest in the company has been lifted this week after BG Group made a positive discovery in a well off Tanzania, raising hopes that Dominion, which operates in the same area, may reach a farm-out agreement.

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