Marks & Spencer gained ground despite the FTSE 100 falling back as the relief rally fizzled out last night.
The retailer was 8.8p ahead at 353.7p after UBS revised its view to "buy", telling clients that, with the valuation premium relative sector declining and apparel sales strengthening, the stock offered a "free option" on the new chief executive, Marc Bolland, the former Morrisons man who came aboard earlier this month. "Food is the key area of opportunity, and Marc Bolland's record could increase the chances of a turnaround," the broker said, abandoning its "neutral" stance.
"Clearly the business is far from perfect, but problems may become opportunities under the new chief executive," UBS explained, revising its target for the stock to 400p. "Food is the major issue, although accessing a younger customer in apparel is also a challenge. For example, when [the Per Una range] was launched, it was aimed at the mid-30s age group. It is now aimed at the mid-40s, probably by force of the customer base."
Overall, the relief rally came to an end, with the FTSE 100 ending 6.75 points lower at 5,188.43, compared to a gain of more than 3 per cent on Thursday. The FTSE 250 was also slightly lower, shedding 10.11 points to 9,637.14. The market spent most of the day in positive territory, but the gains were wiped out when trading commenced on Wall Street, with the Dow Jones Industrial Average turning lower in early trading.
Earlier, the bulls received a boost from Morgan Stanley strategists, who revised their FTSE 100 target to 5,800 from 5,000. The broker pinned its optimism on factors such as the improving trend in global economic growth, particularly in emerging markets and in the US, and on banking sector balance sheets, which have been rebuilt and are more robust now than they were during the worst of the credit crisis in 2008.
Banking shares fell with the market, with Lloyds and Royal Bank of Scotland giving back earlier gains to close 0.3p down at 56.62p and 0.04p behind at 46.73p respectively, while HSBC lost 6.5p to 627.8p as traders watched out for news from its annual meeting. HSBC chairman Stephen Green grabbed attention by saying that further sovereign debt shocks may hit "some Western nations as they come to terms with the reality of their national debts". Standard Chartered lost 45p to 1,637p after Exane BNP Paribas moved the stock to "neutral".
Mining shares booked a mixed performance, with some such as the Eurasian Natural Resources Corporation, up 5p at 1,004p, and Fresnillo, up 21p at 904p, standing firm on the back of some strength on the commodity markets, but many such as Lonmin, down 40p at 1,684p, and Antofagasta, down 9.5p at 886p, succumbing to a round of profit-taking as traders moved to secure recent gains.
Elsewhere, the plumbing and heating group BSS surged by nearly 35 per cent, adding 112p to close at 437p, after the builders' merchant Travis Perkins, which was more than 6 per cent or 45.5p up at 790.5p, unveiled an indicative cash-and-stock offer of 433p per share. The news prompted Panmure Gordon to up its target for BSS to 450p from 340p, with the broker saying that "there is high potential for a competing bid to emerge, as opportunities to acquire a business like BSS do not come around very often".
Collins Stewart was less convinced of the potential for a rival offer, saying that, of the leading merchants, France's Saint-Gobain "could be the only possible counter-bidder and is unlikely to get involved in a bidding war". "With the backing of some BSS shareholders and a high headline price before synergies, we expect this deal to go through smoothly," the broker said, repeating its "buy" view on Travis Perkins.
Further afield, house-building stocks were in focus after UBS, returning from a seminar with various housing market players, said the sector seemed cheap, particularly in light of "broadly stable pricing environment and tight supply". "Both Rics and Rightmove cited recent evidence that properties on sale [had] increased, indicating that pricing could soften into the second half of the year," the broker said as Barratt Developments edged down by 1.8p to 108p and Bellway eased by 1p to 692.5p. "Barratt, Rics and Lloyds expected pricing stability, with only Rightmove being more negative. Most agreed that long-term pricing is likely to benefit from the shortage of supply."
Recruitment group SThree, which is due to issue a trading update next week, was 11.8p better off at 303p after a Panmure Gordon "buy" note offset the impact of Credit Suisse scaling back its target to 370p from 420p. Panmure said the update should provide some colour on the group's performance during the second quarter, pointing out that recent news from smaller peers InterQuest and Harvey Nash provide grounds for optimism.
"Of course, SThree is chasing higher margins at the specialist end of the market and will be more aggressive in exploiting structural growth opportunities, but such anecdotes should bode well for next week," the broker said, revising its target for the stock to 330p, compared to 300p previously.
FTSE 100 Risers
Severn Trent 1,198p (up 39p, 3.4 per cent): Strengthens after posting full-year results; profits exceed market hopes.
Whitbread 1,385p (up 36p, 2.7 per cent): Nomura ups its estimates, raises target price to 2,030p, compared to 1,615p previously.
Unilever 1,868p (up 30p, 1.6 per cent): UBS revises its stance to "buy" from "neutral", maintains 2,025p target price.
FTSE 100 Fallers
BP 494.8p (down 26p, 5 per cent): Says cost of the response to the Gulf of Mexico oil spill has risen to $930m (£642m) so far.
Man 232.8p (down 5.5p, 2.3 per cent): Declines as traders move to book profits from Thursday's strong gains inspired by results.
BHP Billiton 1,913p (down 25.5p, 1.3 per cent): Numerous mining stocks retreat as profit-taking pressures the sector.
FTSE 250 Risers
Redrow 128p (up 3.1p, 2.5 per cent): Gains ground after Arbuthnot revises its recommendation to "buy" from "neutral".
Daily Mail & General Trust 487.2p (up 5.3p, 1.1 per cent): Royal Bank of Scotland repeats "buy" view, raises target price to 600p from 560p.
Electrocomponents 213.7p (up 0.4p, 0.2 per cent): Posts full-year results; profits fall, but news on sales growth pleases.
FTSE 250 Fallers
888 Holdings 53.25p (down 14p, 20.8 per cent): Warns on profits; cut to "hold" from "buy" at Numis; target cut to 80p at Panmure Gordon.
Moneysupermarket.com 61p (down 1.55p, 2.5 per cent): Gains on Altium upgrade, but then falls back amid profit taking.
Qinetiq 129.5p (down 0.5p, 0.4 per cent): Profit-taking following Thursday's gains; cut to "hold" from "buy" at Citigroup.