Market Report: Intertek gains as FTSE 100 swings beyond 5,600

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The Independent Online

The read-across from a European peer boosted Intertek, the testing group, which stood out last night as the FTSE 100 closed above 5,600 for the first time since April. The company, which tests the quality and safety of products for a variety of businesses, saw its shares jump by nearly 4 per cent or 65p to 1,853p after rival group SGS issued an update on strategy, cheering investors with plans to substantially raise revenues and earnings over the coming years. Seymour Pierce said that the update was "directly relevant to Intertek" as it offered clues to the expected level of growth in testing markets.

The announcement also raised the prospect of deal activity, with SGS aiming to drive gains through a combination of earnings growth and acquisitions. "It indicates that SGS is still looking for acquisitions, and Intertek cannot be ruled out in this respect," the broker said, revising its stance on the stock to "outperform" from "hold".



Overall, the markets were strong, with the FTSE 100 rallying by 94.09 points to 5,602.54, and the FTSE 250 closing at 10,548.19, up 107.21 points. Commodity prices underpinned the advance, with metals prices rising in response to continued weakness in the US dollar. The greenback was under pressure as investors looked ahead to this evening's meeting of the US Federal Reserve, with many expecting the assembled central bankers to signal the need for another round of quantitative easing.

Mining equities also drew steam from recent news of falling LME inventories. Antofagasta was among the leaders, adding 24p to 1,189p as traders piled in, while Xstrata rose by 24p to 1,191p. BHP Billiton at 1,980p, up 40p, and Anglo American at 2,546.5p, up 31p, were also higher last night. In the wider sector, precious metals miners were broadly ahead on the back of firmer gold and silver prices, with Fresnillo, for instance, closing at 1,181p, up 13p at the end of the day.

Over in the banking sector, everyone was busy speculating about the next chief executive of Lloyds, which rose by 2.07p to 77.41p. The chatter followed news that Eric Daniels was to retire next year, paving the way for a new boss at the state-backed group.

Other lenders were also strong, with Barclays, the target price for which was upped to 330p at JP Morgan Cazenove, gaining 8.7p to 313.35p, and Royal Bank of Scotland, the target for which was raised to 44p by the same broker, adding 1.18p to 49.02p.

Elsewhere, the engineering group Tomkins was broadly unchanged, easing by 0.1p to 324.4p, as it began trading on the FTSE 100. The stock moved up following the implementation of the results of the recent index reshuffle after the close on Friday. The weakness was pegged on profit-taking, though Weir was 5p better off at 1,434p after joining the blue chips.

On the FTSE 250, Home Retail Group edged up by 2.2p to 214.1p after giving up its blue-chip status. The industrial landlord Segro, which was also relegated to the mid-cap index, fared better, adding 5.5p to 269.3p after Oriel Securities revised its view to "buy" from "reduce", and Goldman Sachs switched its stance to "neutral" from "sell".

Goldman said the recent share price weakness meant that the challenges faced by the company were now "far better reflected in the valuation", adding: "While we expect industrial rental markets to remain relatively weak, there are some encouraging signs of stabilisation from a broad range of indicators."

Further afield, the oil services group Wellstream, up 31.5p at 609p, was once again the subject of rumours anticipating a bid of up to 850p per share. This time round, the chatter threw up the name of Hunting, which was 2p ahead at 622.5p after being spoken of as a possible suitor. The price comparison website Moneysupermarket.com also featured in the market rumour mill, gaining 3.35p to 86.85p amid continued talk of bid interest.

On the downside, Hikma Pharmaceuticals lost 40p to 726p after Numis, worried about the risk to a key Hikma offering, switched its view to "sell".

The broker said the strength of the company's half-yearly earnings was, in its view, "mostly due to a single product, colchicine, marketed by the US generics division". "This troubles us because, according to IMS Health, Hikma has become the highest seller of unapproved colchicine, in parallel with the emergence of the first approved version, Colcrys, marketed by URL Pharma," Numis explained, noting that, if the US Food and Drug Administration followed its own "official guidance of a 'one-year grace period', Hikma's colchicine is due to be pulled from the market any time now".



restaurant group, which owns the Garfunkel's and Chiquito chains, was 2.1p firmer at 267.1p after UBS, taking its cue from recent bids for sector peers Carluccio's and Clapham House, weighed in on the prospect of deal activity. The broker said that, while the company's lack of freehold assets and what it termed "limited opportunity for strategic improvement" could stand in the way of an approach, the resilience of its business, its returns and the potential for growth were sufficient to drive bid interest.

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