Market Report: Lloyds strengthens after Basel III boost

Lloyds Banking Group was the best-performing FTSE 100 stock last year and it looks like 2013 is shaping up to be pretty decent too. Lloyds jumped to the top of the tree today after analysts at UBS rated it a buy and awarded it a share price target of 60p, up from 50p.

The reason? Well, earlier this week the loosening of the Basel III liquidity rules helped all the banking stocks look more attractive and UBS raised its price targets to reflect "the better growth and profitability picture beginning to emerge".

Angus Campbell, head of market analysis at London Capital Group, said: "The upgrade from UBS will be most welcome to investors. For those seeking to expose themselves to the UK as opposed to Europe, Lloyds could be a good stock to hold and the shares hit their highest level since May 2011 today."

Lloyds finished up 2.51p at 53.37p.

The benchmark index was riding high during afternoon trade and hit its highest point since May 2008 with the banking shares and engineers helping it up. Volumes were at decent levels and the FTSE 100 index advanced 45.02 points to 6098.65.

Engineer Meggitt also enjoyed a rise on the back of an upgrade, 15.5p to 425p. Bank of America Merrill Lynch upgraded it to a buy and raised its share price target to 470p, from 430p. The group announced chief executive Terry Twigger is retiring and will be succeeded in May by finance director Stephen Young.

Analysts have been busy with their shares shopping lists and Nomura and Morgan Stanley like broadcaster ITV. Nomura gave it a 125p share price target and the shares lifted 0.6p to 109.3p.

With optimism filling the markets some traders gossiped about water group United Utilities. The North-west of England-focused group was the subject of takeover speculation last year, with Ontario Teachers' Pension Plan, Abu Dhabi funds and China Investment Corporation mentioned as possible interested parties with more than 900p a share mooted. The shares edged up 12p to 687p.

Vodafone was still in demand after rumours of a deal with its joint venture partner Verizon circulated in the week and the shares registered another gain, ending the day up 3.1p at 165.5p.

Telecoms giant BT was also favoured and Nomura's scribes rate it a buy with a share price target of 280p. The shares ticked up 2p to 247.1p.

Goldman Sachs' aptly named Henry Tarr thinks oil prices won't rocket this year or next so oil services groups will suffer. But luckily for shareholders of Scotland-based John Wood Group, Mr Tarr thinks its "high, free cashflow and growth" and low-risk business model make it an attractive stock. He thinks project delays in the sector will hit some companies.

But for Wood, which runs and maintains oil rigs and other oil platforms, he raises his rating of the stock to buy, from neutral and gives it a share price target of 912p. The shares gushed toward the top of the benchmark index, and ended up 24.5p at 774p.

There wasn't such good news for the share price of insurer Aviva. On Tuesday night, after the stock market closed, it announced the sale of the rest of its stake in Dutch insurer Delta Lloyd for £353m. Aviva bought Delta Lloyd in 1973 but began offloading its interest in 2009. It follows its sell-off of its US business last month and according to analysts at Panmure Gordon the sale reinforces their view that Aviva "is executing its disposal programme at better-than-anticipated prices and at pace".

New chief executive Mark Wilson is hoping to create a more agile insurance group that is not weighed down by overseas interests. Panmure's analysts retained their buy rating and gave it a share price target of 425p but the shares declined 8.2p to 373.7p.

Sainsbury's shares were looking past their sell-by date after it posted only a 0.9 per cent rise in like-for-like sales, which was slightly below market expectations. Most think the sell-off was overdone but the shares ended down 9.8p to 329.2p. Today is Tesco's turn in the spotlight.

Small-cap index contractor Costain won a £48m contract from Network Rail for phase three of the West Coast line power supply upgrade. The shares surged 7.5p to 263.5p.

Blur Group, the online exchange that lets clients commission work from marketing agencies and experts around the world, reported strong project growth and the shares charged up 18.5p to 105p.

Also on AIM, budget African airline group Fastjet updated on passenger numbers and said it has carried almost 30,000 passengers in its first month and also raised just over £1m from an equity drawdown facility. It lost 0.11p to 4.52p.

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