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Market Report: Relief rally drives Enterprise higher

The pub groups Enterprise Inns and Punch Taverns bucked a weak market trend last night, rallying as investors bought in on news that regulators had decided against pursuing an investigation into "beer tie" arrangements, which force pub tenants to buy beer from landlords.

Enterprise saw its shares surge to a session high of 149p, up around 25 per cent, while Punch Taverns jumped by almost 17 per cent to 99p at one point after the Office of Fair Trading, responding to a complaint from the consumer group Campaign for Real Ale, said it had found that "there is generally effective competition between pubs", adding that in its view supply ties did not "contribute to higher prices or prevent pubs offering a wide choice to consumers". As a result the Oft will not be taking any further action on the matter, helping Enterprise to close at 147p, up 27.9p, and Punch to strengthen by 12.5p to 97.25p.

Mark Brumby, equity analyst at Astaire Securities, said the decision will "come as a huge relief to the pub companies". "Some 15 per cent to 50 per cent of their income could have been threatened, but the up to 24 months of investigation and the uncertainty is what would have really done the damage," he said.

"The companies and their tenants now only have the recession, the consumer squeeze, the ongoing impact of the smoking ban, aggressive supermarkets and soap-boxing politicians to deal with but, all things considered, [this] announcement is a good result."

Douglas Jack at Numis, while reiterating his "buy" stance on Punch and "hold" view on Enterprise, struck a more cautious note, saying that there will be "no time for the industry to dwell on this result". "Relations at the bottom end of the tenanted pub sector are still strained," he said. "The true problem relating to these pubs was not the tie, but the fact the sector is over-supplied with tail-end pubs, many of which will never again be economic."

Overall, both the FTSE 100, down 1 per cent or 50.49 points at 5,207.36, and the FTSE 250, down 1.1 per cent or 102.13 points at 9,318.91, came under pressure as investors moved to bank profits. Traders spoke of concerns about the recent equity market rally, with many saying it had gone to far. One market watcher was more precise and attributed the sell-off to nervousness ahead of this morning's GDP figures, particularly in light of news that UK retail sales had failed to grow for a second consecutive month.

The gloom offset the impact of some upbeat official figures from China, which showed that the country's economy had expanded at an annual rate of 8.9 per cent in third quarter. The heavily weighted mining sector showed little regard for the news, with Kazakhmys falling to 1252p, down 31p, Antofagasta declining to 845p, down 19.5p, and BHP Billiton losing 29p to 1796p.

Anglo American outshone its peers, rising by 9p to 2285p, after unveiling a management shake-up alongside a production report. Lonmin, down 9p at 1682p, also issued an update, and announced plans to shift its operational headquarters from London to Johannesburg.

Charles Kernot, analyst at Evolution Securities, said both Lonmin's production numbers and its outlook were "disappointing".

"Lonmin sold 683,000 ounces of platinum in the year to September – a notably disappointing number," he said. "The outlook is for broadly similar output in the new financial year, which again reduces attractions – especially against the backdrop of the strong South African rand."

On the upside, Lloyds Banking Group managed to fight off the downdraft, rising by 3.6 per cent or 3.3p to 94.8p amid rumours that the Qatari sovereign wealth fund may step in to aid the group in its bid to avoid participation in the Government's Asset Protection Scheme. There was speculation that the Middle Eastern investors might help the bank with a possible rights issue.

The wider sector fell back as investors scrutinised banking reform proposals from the Financial Services Authority, the UK market regulator, with Barclays declining to 359p, down 5.95p, and Royal Bank of Scotland losing 0.32p to 45.51p.

Vodafone was just behind Lloyds, rising by 3.4 per cent or 4.6p to 139.5p on the read-across from the results of its US peer AT&T. The telecoms group was also buoyed by some supportive comment from Citigroup, which said much of the bad news related to the stock was already discounted, and the results next month "could focus the market's mind on a return to growth and firm trading".

Elsewhere, Segro, the commercial property group, was 5.5p behind at 382p after Goldman Sachs weighed in, saying that the stock, with its exposure to industrial rents, had the greatest downside in the sector. The broker expressed a preference for Land Securities, which ended 1p higher at 661.5p, and Great Portland Estates, which ended 8p behind at 263.2p.

Echoing Bank of America Merrill Lynch, which issued a sector round-up on the day before, Goldman attributed its preference in part to their exposure to the London office market.