Market Report: Profit-takers move in amid Fed jitters

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The Independent Online

Early-morning optimism from traders gave way to voracious profit-taking yesterday as the City placed bets ahead of the US Federal Reserve's meeting. The UK followed Asia's lead as confidence swept the market ahead of the Federal Open Market Committee meeting last night.

Traders wagered that the quantitative easing scheme would not yet be reduced – or tapered, and the FTSE 100 index soared close to a year high at 6816.39. But during the afternoon session, dealers cashed in their positions ahead of the Fed meeting due after the London market closed. The benchmark index finished the day up just 2.97 points at 6777.7.

Some market watchers thought the markets could correct further. Alastair Winter, chief economist at Daniel Stewart & Co, said: "I am getting more convinced that profit-taking is looming in several markets that could lead to a correction of 10-15 per cent. Globally, most vulnerable are the Nikkei, S&P 500, FTSE 250 and Ibex. Prices are already very fancy."

David Madden, a market analyst at spread better IG, said: "Equity markets have enjoyed a good run ever since the US government temporarily raised the debt ceiling nearly a fortnight ago. The political stalemate across the Pond which led to a partial shutdown of US government has almost guaranteed that the Fed will maintain the status quo tonight. But stocks have slipped into negative territory as we approached the end of the trading day as dealers cash in their positions before the Federal Reserve statement."

One of the stocks leading the market up was retailer Next after it raised its profit guidance for the year and reported a strong set of sales numbers. It was top of the table, up 245p to 5,450p.

High street bellwether Marks & Spencer joined Next as one of the retail risers as the market acknowledged data that its clothing business could be recovering market share. Shore Capital's analysts retained their buy rating for the stock ahead of its interim results next week and said the broader M&S "investment thesis, based upon self-improvement (evident in beauty, food, home and international), greater capital discipline, stronger free cash generation and so stronger solvency ratios and rising dividends", makes the retailer attractive despite concerns about its clothing business.

M&S, which this week revealed part of its new Christmas ad campaign, featuring the model David Gandy, was 7.6p smarter at 493.2p.

The oil explorer Tullow has underperformed but analysts at Investec said it was time to close any short positions on the stock, and rated it a hold as it jetted up 11p to 947p. Oil services group Petrofac won a $650m (£404m) gas contract, in joint venture with Italy's Bonatti, to work on the Alrar gas field in south-east Algeria. Liberum Capital predicted the deal could be worth $350m for Petrofac, and rated it a buy. Liberum said the new contract "confirms Petrofac's strong position in Algeria and adds to visibility of revenue forecasts". Analysts at Goldman Sachs were also fans despite being cautious on the oil sector overall. They predicted the sector will see "exploration spend squeezed and large new project sanctions delayed". But they said they still see some interesting investment opportunities although they warned investors should be "highly selective".

They raised their recommendation to buy from neutral for Petrofac, which was pumped up 10p to 1,478p.

Over on the mid-cap index, the Tanzania-focused miner African Barrick Gold said it was on track with its cost-cutting plan and annual production would exceed its current target. It soared 27.1p to 197.2p.

Liberum's analysts also liked Kurdistan oil explorer Genel Energy because of its pipeline and its solid update yesterday but the shares trickled down 2.5p to 957.5p.

AIM-listed Gable Holdings added 0.375p to 62.625p when it raised £10.7m through a placing of up to 17.69 million shares at 55p. Analysts at Panmure Gordon rated it a buy from hold and set a price target of 84p.

Sable Mining raised £17.1m at 9.5p a share but slipped 0.15p to 9.65p.

US-focused oil and gas tiddler Nostra Terra Oil & Gas was expected to announce additional wells at its Chisholm Trail oil prospect in Oklahoma but the shares declined 0.005p to 0.385p.