Market Report: Retail cheer sends Kingfisher to record high

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Signs of improving high-street sales boosted Kingfisher, the retail group which closed at its highest level since June 2007 last night.

Investors piled in after John Lewis reported a 6.3 per cent hike in department store sales in the week to the 3 October, sparking enthusiasm for the wider retail sector. Traders said the news augured well for the likes of Kingfisher, which swiftly rose to 233.1p, up 2.8 per cent or 6.4p. The update also lifted Debenhams, which gained 1.4 per cent or 1.05p to 79.05p, and DSG International, which closed 1 per cent or 0.26p higher at 27.01p.

"Given that John Lewis sales are seen as a good bellwether for the state of consumer spending, the latest figures boost hopes that retail sales picked up in September and started October well after losing momentum in August, when they were only flat month-on-month," Howard Archer, chief UK economist at IHS Global Insight, said. "Encouragingly, the already released CBI distributive trades survey for September showed marked improvement."

Overall, the FTSE 100 hardly moved, rising by 7.23 points to 5161.87 amid relatively muted volumes. The FTSE 250 took its cue from the senior index, adding a mere 3.86 points to 9377.3. "It has been a quiet end to the week for stock markets, with the major indices just consolidating gains over the past few days," Phillip Gillett, sales trader at City spread betters IG Index, said. "The hurdle for the [FTSE 100] at the moment is the 5200 area – this has stopped strength for the past three weeks and traders will be looking out for a breakthrough."

Amlin, up 1.7 per cent or 6.5p at 395p, outperformed its peers, rising as other Lloyd's of London insurers fell or closed unchanged after Bank of American Merrill Lynch adopted a "buy" stance on the stock, saying the market may be underestimating the positive impact of Fortis Corporate Insurance, the marine, liability and commercial property insurance provider snapped up by Amlin earlier this year, now known as Amlin Corporate Insurance, or ACI.

"Although the impact will likely be limited in the very short term, we expect ACI to further add to the diversity of Amlin's portfolio and allow it to allocate more underwriting capital to the higher return catastrophe business," the broker said, setting a 425p target price as it resumed coverage.

In the wider sector, Brit Insurance, which is rated "neutral" with a 210p target at Merrill, was 0.7p behind at 209.4p, while Hiscox, which is also rated "neutral" with a 355p target, eased back to 360p, down 2p. Catlin, which is rated "underperform" with a 325p target, was 1.8p weaker at 352.2p at the end of the day.

Elsewhere, Whitbread, the hospitality group behind the Premier Inn budget hotels chain, received a boost from Barclays Capital, which switched its stance on the stock to "overweight" from "underweight", saying that, notwithstanding recent gains, investors should pile in ahead of next week's interim results.

"We would recommend buying shares ahead of this event as we believe that the previously set full-year, pre-tax profit guidance is likely to prove conservative and we expect consensus forecasts to be revised upwards again," the broker said, raising its target price for the stock, which advanced by 1.6 per cent or 20p to 1269p, to 1430p.

Carphone Warehouse rose to 209.1p, up 1.3 per cent or 2.6p, thanks to some words of support from Nomura, which raised its target price for the stock to 240p from 230p, offsetting the impact of a new circular from Execution, which downgraded the stock to "hold" and advised investors to bank profits from recent gains.

Nomura adopted a different view, telling clients that the revenue and cost synergies from the Tiscali integration, the roll out of the big box store format and the crystallisation of value through the de-merger of the TalkTalk broadband business "should all drive the stock further".

Further afield, ITV stood firm, gaining 0.07p to 46.38p, thanks to renewed bid chatter, with traders citing rumours of interest from RTL, the European media group behind Channel Five. The chatter overshadowed a new circular from Investec, which reiterated its "sell" stance, albeit with a revised 38p target price, up from 35p.

On the downside, the pubs group Enterprise Inns saw its shares slide to 125p, down 3.1 per cent or 4p, after Citigroup issued a "sell" note, highlighting both debt and trading concerns. With the net debt to Ebitda ratio at 7.8 times, the group's leverage is the highest of its pub sector peers, the broker said, setting a 110p target price on the stock.

JD Wetherspoon proved more resilient, firming up by 5p to 500p after the broker said "buy". "JD is our favoured pub sector play. Trading continues to be robust and 2009 margins were up in one of the toughest years for [the sector]," Citi said, setting a 740p target price on the stock.

The broker also adopted a "buy" stance on Mitchells & Butlers, which gained 0.3p to 252.3p. "With careful cash flow discipline, net debt is now falling and we do not expect the group to need to raise equity," Citi said.