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Market Report: Royal Mail posted gains after analysts argued its shares are still cheap

Berenberg weighed in on the row over Royal Mail's privatisation, initiating coverage with the declaration that "shares were sold on the cheap last year and remain very cheap".

The German bank rated the postie a buy and set a target price of 700p – over double the 330p float price – reigniting the debate over whether the taxpayer was short-changed. Key to its analyst Matthew O'Keeffe's thesis is Royal Mail's "surplus" property portfolio, which could bring in £1bn if sold off. But Mr O'Keeffe also argues that increased operational and financial efficiency at Royal Mail, up 6p at 566p, would benefit the taxpayer.

The FTSE 100 surged to a fresh 14-year high yesterday, beating February's record as it closed 21.33 points higher at 6,873.08.

The rally was helped by a buoyant housebuilding sector. Taylor Wimpey added 8.1p to 114.4p after a strong update and a positive sector note from Morgan Stanley helped Barratt add 12p to 386.3p and Persimmon jump 44p to 1,404p.

Elsewhere, the Irish bookmaker Paddy Power lost 2.33p to 56.7p on news that chief executive Patrick Kennedy is stepping down after almost a decade.

Tom Robinson at Deutsche Bank was banging the drum for Kurdish oil. Squabbles between local legislators and the Iraqi government have made getting black gold out of the region difficult but Mr Robinson believes Kurdistan is "poised to become a major exporter". His top picks are Genel Energy, off 10.5p to 931.5p, and Gulf Keystone Petroleum, 2.25p better at 98.25p.

On AIM, the insurance outsourcer Quindell saw a brief afternoon bounce thanks to an unlikely rumour that Aviva is planning an 80p-a-share bid. Quindell ended the day down 0.75p at 20p.

The independent oil and gas operator Egdon Resources put on 2p to 23.75p after announcing plans to snap up onshore UK shale gas assets from Alkane Energy, 2.25p lighter at 41.5p.

African-focused oil and gas operator Aminex, which last week offloaded its US assets, climbed 0.14p to 0.94p as its chief executive Jay Bhattacherjee bought up 2.4 million shares.