Market Report: Recovery signs underpin Intercontinental Hotels

Intercontinental Hotels stood firm in the face of losses for the wider market last night, with the bulls eyeing signs of a faster-than-anticipated recovery in the global hotels market.

Traders were lured by a push from the analysts at JP Morgan Cazenove, who said the hotel market's return to growth in revenues per available room had strengthened "at least one quarter" faster than expected. Intercontinental, with its exposure to the fast-recovering US and Asia-Pacific markets, and with its undemanding valuation, offered a way to play this trend, the broker explained, helping IHG add 8p to 1,054p.

"Occupancy is steadily recovering, which we expect to be followed by rate recovery in due course," JP Morgan said, upping its IHG earnings forecasts to reflect the turnaround. "We believe the pricing outlook for 2011 is particularly strong. Supply is forecast to be only 1 per cent, below the 2 per cent long-run average and the expected demand increase of 2.9 per cent."

Overall, the FTSE 100 fell back, shedding 60.26 points to 5,723.43, while the FTSE 250 lost 18.44 points to 10,469.15, with worries about Greece's finances and weakness in the mining sector proving a drag on the London market. Commodity plays were hit after BHP Billiton's production results failed to impress. The mining giant, which closed 62p behind at 2,118p, also reported the discovery of potential violations of US anti-graft norms. BHP said it was co-operating with the Securities and Exchange Commission, which was looking into the matter. In the wider sector, Rio Tinto was 107.5p lower at 3,691p, while Xstrata was marked down by 52p to 1,165p.

arm, the Cambridge-based semiconductors group whose technology features in Apple's iPhones and iPads, was the strongest of the blue chips, swelling to 250.5p, up more than 3 per cent or 7.5p, as traders bought in on the read-across from the Californian firm's quarterly results. Apple surpassed Wall Street hopes, with revenues rising by almost 50 per cent and profits soaring by 90 per cent. ARM was also aided by another round of bid talk, with speculators touting theories of takeover interest from a rival chipmaker such as Intel. One theory, which surfaced on Tuesday, and which failed to gain much support among traders, had Apple mulling an approach, with the rumour-mongers citing ARM's relationship with the company.

Imagination Technologies, whose roster of shareholders includes both Intel and Apple, was also buoyed by the Californian group's results, adding more than 5 per cent or 14.1p to 266p. Here, the read-across was supplemented by a push from Evolution Securities, which upped Imagination to "buy". "Apple's and ARM's share prices have risen [around] 25 per cent since the beginning of February, whereas Imagination's has fallen," the broker said, adding that, relative to ARM, Imagination also trades on weak valuation multiples.

The International Monetary Fund's bank tax proposals were in focus around financials, with Barclays easing by 6.9p to 365.85p and Lloyds closing broadly unchanged, down 0.04p at 67.18p, as analysts studied the ideas. Caution about the potential implications – Seymour Pierce's analyst Bruce Packard advised against buying into the sector "until it becomes clear where the regulatory goalposts are going to be moved to" – partially offset the impact of some supportive comment from Citigroup, which reiterated its "buy" view on Barclays and Lloyds. There was no stopping the Royal Bank of Scotland, however, which moved further beyond the Treasury's average buy-in price of 49.9p, adding 1.35p to 54.05p as traders continued to pile into the state-backed lender last night.

The retail sector was mixed. Supermarkets gained ground, with Tesco rising by 7.05p to 438.05p after Goldman Sachs abandoned its "cautious" view on food retailers. Marks & Spencer, on the other hand, was driven back to 376.1p, down 11.5p, after Bank of America Merrill Lynch moved it to "underperform", warning that the high street bellwether's premium rating may be at risk, "owing to a lack of operating leverage and a lack of a credible international strategy".

elsewhere, game, the video games retailer, unsettled sentiment across the mid-cap retail space by announcing the departure of its chief executive alongside lower profits. The company, whose shares slumped by almost 12 per cent or 12.05p to 89.25p, said its chief operating officer also intended to leave after a handover period. Carphone Warehouse was among those that shrugged off the news, gaining 6.5p to 186.5p thanks to Morgan Stanley, whose analysts said they preferred Carphone's prospects over those for Kesa Electricals, down 1.2p to 132.9p, and DSG International, which was 0.78p lower at 35.02p.

Further afield, Ladbrokes was marked up by 5.3p to 162.7p after the bookie said it was in line for an £80m boost after striking a corporation tax deal with the taxman. Panmure Gordon, while acknowledging the boost and its positive impact on future earnings, stuck to its negative line, however, saying that "the turnaround job for incoming chief executive Richard Glynn will take longer to achieve than the market anticipates".