Market Report: L&G joins in as Footsie touches fresh high

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The Independent Online

Legal & General stood out as the FTSE 100 swung past the 4,800-point mark for the first time since October.

The insurer gained 5.6 per cent or 4.1p to 77.8p after Goldman Sachs weighed in, arguing that the stock was mis-priced at current levels. Further equity market gains promise to drive the share price higher, while the potential downside in the event of a turnaround is limited, the broker said, reiterating its "conviction buy" stance. "In our view, its gearing alone should be enough to see it recover from 14-year lows if the market continues to rise," Goldman explained.

Moreover, L&G's ability to generate cash has yet to come into focus. "It is early in the company's transition from a focus on embedded value growth to cash returns," the broker said. "However, over time we believe a consistent stream of cash flow will be generated, along with a simpler investment case."

The wider life insurance sector was also strong, with Aviva rallying by 5.5 per cent or 21.4p to 410.7p as investors regained their appetite for risk. Prudential rose to 532.5p, up just over 2 per cent or 10.5p, and RSA insurance was 1.7 per cent or 2.1p heavier at 124.5p.

Overall, helped by stronger oil and metals prices, the FTSE 100 enjoyed its fourth consecutive session of gains, climbing to 4850.89, up nearly 2 per cent or 94.31 points, while the FTSE 250 added 1.7 per cent or 147.47 points to 8678.83. The mid-cap index is now at its highest point since September.

Although there was little significant corporate or economic newsflow, investors on both sides of the Atlantic were cheered by upbeat comments from Ben Bernanke, the chairman of the US Federal Reserve, who said that prospects for a return to global economic growth looked good "in the near term". "After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good," he said at a conference of central bankers and finance officials in the US state of Wyoming.

On the FTSE 100, the testing group Intertek was buoyant, advancing to 1173p, up 2.5 per cent or 29p, after Bank of America-Merrill Lynch abandoned its negative stance, saying that a long-term view of the group's markets "suggests substantial rerating potential".

"The worst of the cycle and earnings risk now looks behind us, so we are now focusing on the longer term drivers of the industry, which remain intact; Intertek should deliver high single-digit organic revenue growth in 2010-11," the broker said, upgrading the stock to "buy" from "underperform", with a revised 1,400p target price, compared to 710p previously.

Elsewhere, the mining sector remained strong, as investors continued to buy in on recent weakness and firmer commodity prices, with Xstrata rising by just over 3 per cent or 24.5p to 834.5p and Lonmin climbing to 1,488p, up 3.3 per cent or 48p.

Eurasian Natural Resources was broadly unchanged, easing by 2p to 851.5p, as Credit Suisse weighed in, upping its target price for the stock to 960p from 800p.

On the second tier, Inchcape, down almost 3 per cent or 0.84p at 29p, was held back by HSBC, which moved the car dealer's stock to "underweight" from "neutral", saying what while it did not expect a significant recovery in most of the group's markets until 2011, the good news on cost and working capital reduction was already in the price. Furthermore, given the paucity of credit, it was hard to second guess the eventual course of recent takeover speculation.

"On fundamentals, the shares have now overreached themselves," the broker concluded, revising its target price for the stock to 24p from 21p. "In our view, they are susceptible to a correction if bid interest does not become tangible and if economic data stops surprising on the upside."

Parts of the housing sector failed to make much headway amid a round of profit-taking, with Barratt Developments retreating to 237.3p, down 1.5 per cent or 3.6p.

On the upside, BBA Aviation strengthened by 2.1 per cent or 3.2p to 157p thanks to Citigroup, which switched its stance to "hold" from "sell". "Our previous 'sell' rating reflected caution on the relatively indebted nature of the business and the weak conditions in its end markets," the broker said. "We now believe that, after robust first-half trading and strong cash generation, the financial position looks more secure and that trading is near to a trough."

Further afield, Fidessa, which supplies trading platforms to the financial services industry, touched a session high of 1,125p before relaxing to 1,098p, down 14p, after Numis moved its recommendation to "add" from "hold" as it updated its estimates to reflect the company's interim results, which were published at the start of this month.

"We remain of the view that Fidessa is one of the most attractive companies in the sector, and with the price having come back over 10 per cent since the results, we move back to a positive recommendation," the broker said, keeping its target price for the stock unchanged at 1,280p.

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