Market Report: Revived Halfords is pedalling in front

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The Independent Online

Shares in the bike retailer Halfords were pumped up to a two-year high yesterday on hopes in the City it is now on the right track. The analyst Georgina Johanan at JPMorgan said she thinks the bike and car accessories specialist is putting its "wheels back in motion" with better customer service, more products and a better online business.

Halfords, which sells a range of bikes designed by the Olympic cyclist Victoria Pendleton, had been viewed as a high-street dinosaur with a poor online presence and too many stores. But it has worked hard to improve its fortunes, and new boss Matt Davies, who joined from Pets at Home last year, has been well received.

The 467-store chain will update the market at a strategy review on 23 May.

Ms Johanan predicted its "high-quality management" will accelerate "enthusiasm in the story". She claimed the forecasts by analysts for 2015 earnings are "conservative", reckoning this should be upped by around 10 per cent.

She drove up her rating to overweight from underweight, and increased the target price to 405p.

Investors took note, and the shares raced up the mid-cap index, adding 16.7p to 385.7p, levels last seen in mid-2011.

The FTSE 100 was also enjoying itself yesterday. Surprise news that Germany's economy was still powering ahead thrust the benchmark index to a five-and-a-half-year high. Strong industrial production data from the country allayed fears that Europe's powerhouse could be faltering, and Germany's Dax index reached another record, moving above 8,200.

The data reassured investors about the strength of the eurozone and was joined by better-than-expected Chinese trade data. The blue-chip index added 26.18 points to 6,583.48, a level not seen since November 2007, and on a day when ex-dividends took around 10 points off the index.

Some traders were hopeful it could match the other European indices and eventually reach its all-time high, set in 1999 at 6,930.

But there was scepticism elsewhere, with dealers cautious on the long-term prospects of this latest bull run. One trader said there was a reluctance to commit funds for the long term, and the length of time traders hold positions has reduced sharply as the underlying eurozone issues have not been resolved.

Despite the rising market, volumes were low, giving traders time to gossip. Bid speculation focused on the pharmaceuticals group Shire. Nearly every name in the business, from Bayer to Pfizer, has been linked to the group at one time or another. This time, dealers speculated that the United States giant Bristol-Myers Squibb and AstraZeneca could be taking a look. Shire was up 44p at 1,906p.

Standard Chartered had a bad day after revealing a drop in first-quarter operating profit, hit by issues in Korea and rising bad debts. The shares declined 75p to 1,625p.

Sales of accountancy software to small businesses helped Sage to report a 6 per cent rise in its first-half pre-tax profit, and the shares added 7.7p to 347p. Its finance director, Paul Harrison, will become finance chief at Aim-listed Wandisco, which improved 37.5p to 977.5p.

The insurance group Resolution reported an 18 per cent drop in UK sales in the first quarter, from £173m last year. It edged up 2.5p to 274.9p.

On the mid-cap index, the grocer Ocado was in favour as traders were expecting confirmation from Morrisons that the pair have set up a distribution partnership. Ocado gobbled up 22.5p to 210p.

The property website Rightmove posted a 20 per cent increase in web traffic for the first four months of the year and it advanced 49p to 1,957p.

The construction group Costain revealed at its annual meeting that it has had a good start to 2013 with the order book at £2.5bn, against £2.4bn at the end of last year, and said it will look at further acquisitions after losing out to Kier to buy May Gurney this year. The failed bid cost it £4m. Yesterday the shares built up a 14.5p gain to 280p.

The US oil producer Nostra Terra, an Aim tiddler, is expected to announce that it has acquired additional working interest at its High Plains prospect in Texas today. Its shares added 0.01p to 0.46p.