Stagecoach led the transport sector higher last night, with the prospect of an improvement in unemployment trends driving sentiment.
The catalyst was a new circular from the scribblers at JP Morgan Cazenove.
Their point of departure was the assumption that "the UK economy will not re-enter recession, and that a recovery is under way". This – if it comes to pass – should bring more people into work. And more people in work means more people on buses and trains to and from work.
But while falling unemployment should boost volumes across the bus and rail businesses, earnings from the latter are likely to lag behind owing to the unhelpful combination of high franchise fees and lower subsidies. In other words, the best way to play these trends, JP Morgan said, is by investing in companies with big bus divisions.
Stagecoach stands out, for while it has a strong position in the rail business, it is "primarily a UK bus operator". Not just that but it boasts "higher UK bus margins than its peers", a strong balance sheet, and a history of returning cash to investors.
"Given this history, we believe it possible that cash could once again be returned to shareholders, adding a near-term catalyst," the broker said, fuelling a 9p rise in Stagecoach shares to 249.1p.
The broker also had kind words for Go-Ahead, which rose by 29p to 1,490p. National Express, in contrast, found itself out of favour, easing 1.3p to 254.3p, after JP Morgan said that while it had diverse earnings, its UK bus business was "narrowly focused".
Overall, market movements fell hostage to some grim economic data out of the US in the afternoon, so much so that despite a late rally, the FTSE 100 still ended broadly flat at 5,855.01, up 7 points.
The culprit was an official report showing that the world's largest economy managed to add a mere 54,000 non-farm jobs last month – far below market expectations of around 150,000. The result was that the US unemployment rate edged up to 9.1 per cent in May from 9 per cent in April, confounding hopes of a fall to 8.9 per cent last month.
The figures came on the heels a series of negative readings on the global economy. Earlier in the week, the bulls backed off on receipt of data showing a slowdown in the pace of growth in manufacturing activity around the world, including the UK.
Adding to the woes was news that the UK service sector – a key component of domestic output – had also lost steam. That was among the factors that led to a flat performance on the more UK-focused FTSE 250, which ended at 11,972.66, up 9 points.
Commodity prices were mixed, as the combination of bargain hunting from earlier falls and a weaker dollar offset the impact of the demand concerns stoked by the economic news out of the US.
As a result, many leading miners mimicked the wider market with a broadly flat performance. Rio Tinto was 35p lower at 4,107.5p, while Kazakhmys lost 8p to 1,263p. Glencore, the Swiss commodities giant, fared worse, and continued to trade below its mid-range flotation price of 530p apiece, closing down 5.9p at 505p.
In the banking sector, the focus was on Greece, with traders keeping an eye out for more news on debt woes. That dampened the mood across the sector, with the waning risk appetite holding the Royal Bank of Scotland, the target price for which was cut to 44p by Canaccord Genuity, back by 0.22p at 41.54p, and Barclays, the target for which was trimmed to 305p by the same broker, back by 0.2p at 265.5p.
Further afield, the buyout lender Intermediate Capital found few takers, sliding by more than 6 per cent or 21.4p to 323.6p. The trigger for this fall was a warning from Credit Suisse, whose analysts said that while the group's figures for the year to March were strong, investors should take note of "headwinds" gathering on the horizon.
"The medium-term opportunities remain attractive as Intermediate is well positioned to benefit from the refinancing gap in the industry, and the strong performance of its funds should aid third-party asset gathering. However, we do not see these opportunities gaining significant traction in the next 12 months," the broker said, lowering the shares to "neutral".
Asos, the online retailer whose shares fell on Thursday amid valuation worries, continued to trade lower despite some support from Citigroup and Société Générale, both of which stuck with their respective "buy" recommendations on the back of the group's strong full-year results. But Finncap struck a contrarian note.
Although the broker did nudge up its forecasts on the back of Thursday's update, thus increasing its target for Asos to 1,630p, Finncap analyst David Stoddart said it was "insufficient" to change its "sell" stance.
The bears seemed to prevail last night, as online retailer Asos ended the trading day 143p lower at 2,001p.
FTSE 100 Risers
Autonomy 1,825p (up 70p, 4 per cent)
Software group completes the acquisition of key assets of Iron Mountain's digital division.
Johnson Matthey 2,052p (up 39p, 1.9 per cent)
Gains after Deutsche Bank revises its target price for the metals group to 2,365p from 2,250p.
WPP 739p (up 7p, 1 per cent)
Marketing giant announces the acquisition of a majority stake in Brazilian digital agency Gringo.
FTSE 100 Fallers
Serco 580.5p (down 17p, 2.9 per cent)
Outsourcing group falls back as traders bank profits from Thursday's strong gains.
Severn Trent 1,480p (down 13p, 0.9 per cent)
Water firm eases after S&P Equity Research switches its stance to "hold" from "buy".
Compass 588.5p (down 5p, 0.8 per cent)
Catering giant falls back after director Gary Green sells 401,981 shares.
FTSE 250 Risers
Capital & Counties Properties 178.2p (up 1.4p, 0.8 per cent)
Gains ground as investors move into the property-related stocks.
Hiscox 424.7p (up 0.7p, 0.2 per cent)
Lloyd's of London insurance sector in focus amid some recent signs of consolidation activity.
Shaftesbury 530.5p (up 2p, 0.4 per cent)
Like Capital & Counties Properties, rises with the wider real estate sector.
FTSE 250 Fallers
Victrex 1,421p (down 17p, 1.2 per cent)
Polymer producer falls after UBS repeats "sell" recommendation, albeit with higher 1,320p target price.
Bellway 714p (down 6p, 0.8 per cent)
House builder eases following on from recent JP Morgan downgrade to "neutral".
Halfords 395.3p (down 3.2p, 0.8 per cent)
Retailer falls after taking a £7.5m hit owing to the recent collapse of Focus DIY.