Market Report: Strength down the line gives Spirent a boost

With analysts predicting "top of the range" figures on Thursday, Spirent Communications found itself on the FTSE 250's leaderboard last night after it was praised for its potential to benefit from developments in the world of telecommunications.

Traders put the telecom testing equipment developer's strong performance down to an optimistic note from Panmure Gordon, in which its analyst George O'Connor reiterated his "buy" recommendation ahead of the group's final results this week, describing it as "an investment play on many levels".

"Like the fixed-line carriers a decade ago, today mobile operators are looking at a stark transition – data is more important than voice," said Mr O'Connor. "Data means new services with mobile data, mobile internet, cloud computing and virtualisation, new devices, new competitors and new economics."

Raising his price target to 162p, the analyst predicted that the company – which gained 5.2p to close at 156p – "will navigate its customers through the (new) data world".

"Our investment view is that Spirent is a key beneficiary of the short- to medium-term opportunity in the development of 4G technology," he added, "while for the medium to longer term it benefits from the broader development of connectivity, data and mobility computing."

Overall, the FTSE 100 started off moving lower following an impressive rally last Friday, but it rose into positive territory after bullish comments on the US economy from two Federal Reserve officials. By the bell, however, the top-tier index had returned near to where it started, closing at 5,994.01 – a slight decline of 7.19.

Last year's profit may have been more than double 2009's numbers, but HSBC's failure to match expectations and the cutting of its long-term targets meant disappointed shareholders left the bank 33.1p weaker at 678p.

Elsewhere in the sector, Lloyds Banking Group – which released its figures last week – slipped back 0.89p to 61.96p as its rating was cut by KBW to "underperform" and UBS removed the group from its European key call list of stocks.

The top-tier index's gold medal went to Essar Energy, after Credit Suisse focused on the energy group. The broker gave it an "overweight" recommendation and a target price of 600p, saying it "offers investors a strong growth profile" and that its "strategy ties in well with the outlook for the Indian power market, which is in structural deficit."

Stuck at the opposite end was Associated British Foods, which plummeted 60.5p to 966.5p. A figure of 3 per cent sales growth from its Primark business represented a slowdown for the fashion retailer, with ABF blaming both the VAT increase and inflation for dampening consumer demand.

Next was also down, shifting 48p to 1,976p, while Marks & Spencer edged back 4.6p to 346.4p, despite Arden Partners' Nick Bubb keeping his "buy"advice on the high street institution.

The miners may have finished mainly in positive territory, but Centamin Egypt did not fare so well, retreating 5.4p to 118.5p. Yesterday's fall followed reports that Egypt was temporarily banning gold exports, although the group said it had not been made aware of any restrictions and that operations at its Sukari mine have continued as normal.

Elsewhere in the sector, Xstrata climbed 22p to 1,405p in the wake of reports that Glencore – which holds a large stake in the blue-chip miner – is getting ever closer to a possible float. There has been persistent speculation that the commodities trader could attempt a merger with Xstrata following its listing.

The house-builders were looking strong, with Taylor Wimpey 1.73p ahead at 39.54p while Redrow and Persimmon were up 5.2p to 135.3p and 7.2p to 470.4p respectively. Although latest figures showed that house prices in January fell year-on-year in England and Wales for the first time in over a year, traders instead pointed to therecent bullish sentiment around the sector. Positive results are expected this week from both Taylor Wimpey and Persimmon, while there were also reports of a number of offers being made for the former's US business.

On the Alternative Investment Market, vague speculation was doing the rounds that Coal of Africa could be in line for a 200p-a-share bid, although traders played down the tale. The miner, which has been the subject of similar talk before, booked gains of 6.5p to close at 91.75p.

Investors were given more details on African Aura Mining's plans to split in two as it closed 17p better off at 291p. If the proposal passes a shareholder's vote at the start of April, its iron and gold units will separate, with its yellow metal assets transferring to a new company called Aureus Mining.

Elsewhere, Bango dropped back 21p to 101.5p after saying it would miss its forecasts for the full year. It is the second profit-warning since October from the group, which specialises in mobile analytics and billing.