Market Report: Man claims Footsie crown despite warning on QE

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Man Group continued to build on the recent uptick at its flagship fund last night, though some in the City warned investors against getting carried away as central bankers get ready to pump more money into the economy.

The hedge fund group was 6.6p higher at 257p, with traders pinning the gains on the recent run of strength at its AHL fund. Indeed, the uptick has boosted Man's shares by nearly 20 per cent since the beginning of last week. Numis said that while the rally was fitting, investors should pay closer attention to prospect of another round of quantitative easing or central bank action to stimulate the economy by further increasingly the money supply.

"QE was cited by management as one of the key factors in 2009 behind the weak AHL performance, which got [the fund] below its high watermark in the first place," the broker said. The fund fell by nearly 17 per cent in 2009 and Numis said that, on its estimates, over 13 per cent of the slump could be pinned on AHL's exposure to bonds and currencies, "arguably the assets most directly impacted by QE behaviour and therefore congruent with management's view".

"We believe that if further QE is announced it is possible that this recent performance may become short-lived," the broker explained, adding that while AHL's processes may have been adapted to cope with another round of monetary easing, "this remains unproven in a live pricing environment". "We would therefore likely turn short-term sellers of Man if any further significant QE is announced in the coming weeks," Numis said, sticking with its "hold" view for now.

overall, the benchmark FTSE 100 moved closer to the 5,700 barrier, adding 14.79 points to 5,672.4 last night. The FTSE 250 was also firm, up 79.9 points to 10,804.84, as investors continued to buy in on hopes that central banks here and in the US would step in with new measures to bolster economic growth. Weir was among the strongest of the blue chips, gaining 37p to 1,580p after UBS weighed in.

The broker argued that while the shares were hitting new peaks, there were still enough reasons to stick with the engineering group. Beyond the prospect of earnings upgrades at Weir's trading update next month, UBS said the stock benefited from the potential upside linked to longer-term opportunities in the shale gas and nuclear markets.

"If international shale gas production materialises, the opportunity could be worth about 300p per share of upside to Weir," the broker said, repeating its "buy" view.

Elsewhere, the publishing group Reed Elsevier was 7p firmer at 550p on some vague talk of deal activity. A more credible reason for the rise was a push from Deutsche Bank, whose analysts highlighted the read across from the US payrolls data released on Friday. The figures showed another rise in legal services employment, a strong lead indicator for legal publishers such as Reed. "The average headcount for 2010 will of course still be below that of 2009, but we are increasingly confident that average headcount in 2011 will be above 2010," the broker explained.

On the downside, valuation worries pressured Prudential, the insurer which fell by 8p to 628.5p last night. JP Morgan Cazenove lowered the stock to "underweight", arguing that that valuation seemed up with events. In the wider sector, Legal & General was 0.1p better off at 103.7p, while Standard Life rose by 2.3p to 232.2p and Old Mutual gained 1.6p to 142.4p.

Deutsche Bank dampened the mood around Autonomy, the software group, which fell by 35p to 1,485p after the broker lowered the stock to "hold" from "buy". Deutsche said that while the company's IDOL product was geared to the growing need to understand corporate information, Autonomy needed to do more drive growth.

"To deliver sustained growth, a company needs to pre-emptively invest," the broker said. "Autonomy has neglected this and now needs to either reset its margin or make a transformational acquisition that carries additional risk."

Intercontinental Hotels failed to make much headway last night, closing broadly only slightly higher at 1,159p, up 5p, after UBS issued a sector round-up. The broker said that just as the recent downturn in hotel revenues was at odds with past trends, it expected the recovery to be different, with revenues per available room likely to experience low growth once the first year of recovery has passed. Bearing this in mind, UBS reiterated its "sell" on the stock, albeit with a revised 1,050p target price, compared to 970p previously.

the property website Rightmove, down 4p at 758p, was wrong-footed by Altium, which lowered the stock to "hold" on valuation grounds. The broker also weighed in on Mulberry, the luxury goods group which rallied by 30p to 522.5p after Altium, returning from a visit to the company's Somerset factory, reiterated its "buy" stance.

"The momentum shown by Mulberry's spring wholesale orders (up circa 100 per cent) is an indication that it has broken into a different league and has significant growth ahead of it," the broker said.

MPetrofac 1,428p (up 35p, 2.5 per cent) Boosted by $250m Sharjah contract win; target price raised to 1,450p at Evolution Securities.

MBurberry 1,038p (up 22p, 2.2 per cent) Rallies ahead of its first half trading update, which is due tomorrow.

MInmarsat 644p (up 13.5p, 2.1 per cent) Goldman Sachs revises its recommendation to "buy" from "neutral".

qMarks & Spencer 405.7p (down 5.3p, 1.3 per cent) Eases as HSBC revises its recommendation to "neutral" from "overweight".

qBP 432.35p (down 3.5p, 0.8 per cent) Falls back as Royal Bank of Scotland revises its recommendation to "hold" from "buy".

qBHP Billiton 2,149p (down 11.5p, 0.5 per cent) Miners ease; Deutsche Bank lowers its target price to 2,000p from 2,212p.

MWood Group 449.9p (up 20.5p, 4.8 per cent) Posts an interim management statement; target price raised to 500p at Evolution Securities.

MDunelm 440.1p (up 19.6p, 4.7 per cent) KBC Peel Hunt initiates coverage with a "buy" recommendation, 520p target price.

MHays 121.4p (up 3.5p, 3 per cent) Rises as Bank of America Merrill Lynch revises its target price to 116p from 105p.

qPetropavlovsk 999.5p (down 20.5p, 2 per cent) Miners weaken; remains pressured following iron ore unit's decision to halve IPO size.

qTravis Perkins 854.5p (down 9.5p, 1.1 per cent) Publishes an interim management statement for the third quarter.

qAveva 1,391p (down 12p, 0.9 per cent) Pressured as Piper Jaffray revises its stance to "underweight" from "neutral.