Market Report: Smiths' crisp rises as Footsie recovers
Friday 28 June 2013
England's most common surname proved a coincidental hit with investors yesterday as the City's leading share index showed further signs of recovery. Smiths Group, the technology specialist which makes X-ray machines and detectors to check cargo freight for explosives, rose 49p to 1,319p after an upgrade from analysts at UBS.
Last month, the firm revealed it had received an approach for its medical division which could net it about £2bn and UBS said it believes a sale "will realise the fundamental value of the business", and upgraded it to a buy.
"It is likely to attract bidders for the other Smiths businesses and will reduce the conglomerate discount some investors apply to Smiths," the broker added.
Not to be completely outdone, packaging group DS Smith climbed 12.9pp to 252.7p after its 2012 profits rose 51 per cent to £166.2m and the company outlined €120mn (£102m) in cost savings.
Smith & Nephew also rose by 3.5p to 737p.
Overall, the FTSE 100 continued on an upward trend, climbing 77.92 points to 6,243.40 having been hit by fears over the global economy last week.
William Nicholls, a dealer at Capital Spreads said: "The 'risk-on' button has been firmly pressed again today as the equity markets receive their third cash influx on the trot.
"As company shares start trading across the pond the move has only accelerated to the upside and it almost seems as though investors are now panicking about missing the move – they are seeing real value following the torment of the last couple of weeks.
"This rally is starting to pick up momentum now which may well continue in the near-term and beyond. All of a sudden there is a new air about the markets," he added.
Direct Line Group advanced by 1.3p to 228.7p despite cutting 2,000 jobs on Wednesday.
"The stock offers one of the highest yields in the sector, which we believe is well underpinned, especially given new initiatives on cost savings," broker Normura said. "However, we expect limited, near-term performance in the shares after the catalyst of the new cost initiatives."
Elsewhere, Standard Chartered fell before closing up 5.5p at 1,436p as Morgan Stanley rated the company overweight.
"Asia macro improvement leads us to expect growth from the company, though margin compression is a concern, which is most exposed among our European banks. The prospect of Asia slowing is now reflected in our bear case."
WPP was another beneficiary of bullish sentiment, rising 49p to 1128p.
Experts pinpointed a bullish note from Bank of America Merrill Lynch as the reason. The broker added the advertising group to its most-wanted list.
"WPP offers an attractive combination of value and growth and therefore should perform well under the boom phase of the style cycle," BofA ML said. "We believe WPP is attractive versus quality consumer staples trading on close to 20 times PE."
Among the mid caps, Icap, the inter-dealer broker run by Michael Spencer, was in focus amid claims that David Casterton, a senior executive, knew that some of the firm's brokers worked with traders at UBS AG to "manipulate" benchmark interest rates.
The story was staunchly played down by Icap yesterday: "Neither the company nor its senior management was aware of any corrupt payment from any source at any time. Any suggestion otherwise is false and defamatory."
Icap shares crept up 4.3p to 357.9p.
And finally, Renewables Infrastructure Group unveiled plans to raise £300m in an IPO in London. The fund plans to buy wind farms and solar parks in Britain, France and Ireland with a total capacity of 276 megawatts.
Renewables Infrastructure "will give investors the potential to secure a long-term, stable, inflation-linked yield from a diversified portfolio of high-quality operational wind and solar assets", chairman Helen Mahy said.
Looking ahead to the next few days, experts were positive the market could make further gains.
"First it was the turn of the optimists to feel the pain, now the pessimists are beginning to doubt themselves. After three strong 'up' days for the FTSE 100, the bears can be forgiven for feeling downcast," said David Madden, at IG.
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