Market Report: Taxpayer profits as RBS gains with blue chip peers

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The Independent Online

Profits on the taxpayer's stake in Royal Bank of Scotland widened as traders regained their appetite for risk, driving blue chips higher last night.

RBS was more than 4 per cent or 2.3p stronger at 52.7p, closing further ahead of the Treasury's average buy-in price of 49.9p, while Barclays, which was aided by some comment from Deutsche Bank, firmed up by 2.3p to 372.75p as quarterly results from Goldman Sachs offset worries about the Wall Street giant's run-in with the SEC, the US market regulator. Goldman surpassed expectations on both revenues and profits, boosting the mood across the London market, which is awaiting updates from UK banks. Lloyds, which was 1.8p higher at 67.22p after a report suggested that the hedge fund firm Lansdowne Partners had become the group's biggest shareholder after the UK taxpayer, and Barclays are up at the end of this month, with HSBC, up 0.7p at 691.7p, RBS and Standard Chartered, up 9p at 1,793p, expected to follow suit at the beginning of May.

RBS received an additional boost from Société Générale, whose strategists said that with a hung parliament on the cards, sterling was likely to renew its slide as the parties work out ways to form a government. RBS, they added, was among 15 stocks – the list includes Barclays – that offer a potential hedge against this prospect, boasting a high level exposure to the US and a record of outperformance during previous runs of weakness in the pound. Of the other stocks highlighted by the broker, AstraZeneca firmed up by 29p to 2,972p, while Royal Dutch Shell gained 25p to 2,010p.

overall, the benchmark FTSE 100 swung to 5783.69, up 55.78 points, while the FTSE 250 gained 96.73 points to 10487.59. The miners were among the leading beneficiaries of the shift in sentiment. Commodity markets firmed up as traders waded back, boosting the likes of the Eurasian Natural Resources Corporation, which was marked up by 29p to 1,220p, and Antofagasta, which closed at 999p, up 16p. Xstrata was slightly lower, however, easing by 8.5p to 1,217p, after the Australia coal producer Macarthur Coal confirmed that the Anglo-Swiss miner hadn't made an offer for its business.

Primark's owner, Associated British Foods, led the retailers, standing out with a rise of 56.5p to 1,015p after issuing upbeat interim results. In response, S&P Equity Research switched its stance to "hold" from "strong sell", while Credit Suisse upped its target for AB Foods to 1,030p from 980p. In the wider sector, Next was 32p stronger at 2,315p while the retail bellwether Marks & Spencer firmed up by 6p to 387.6p.

Elsewhere, Barclays Capital made some bearish noises on regulated utilities, but said that of all the ones that it covered, National Grid, up 14.5p at 663p, screened best. Terming it "best in class", Barclays said that, when compared to its European peers, the company stood out not just in terms of total shareholder return and diversification, but also in terms of its resilience in the face of shifting macroeconomic winds. "National Grid's equity case in unique, combining predictability with growth," the broker added, adopting an "overweight" view.

Also on the upside, British Sky Broadcasting gained ground, closing 5.5p higher at 630p, amid optimism ahead of the pay-TV provider's third-quarter figures, which are due at the end of this month. Deutsche Bank said it expected the update to show continued strength in the demand for Sky's high definition, or HD, offering, adding: "The combination of continued strong HD growth and the unregulated [though monitored] pricing of HD leaves Sky's competitive positioning increasingly strong."

Over in the oil & gas space, the services group Wellstream made some headway, climbing to 660p, up 31.5p, after UBS offered some support, upping the stock to "neutral" in a new sector review. Wood Group, which was raised to "buy" by the same broker, was also higher, adding 18p to 393.2p. UBS also upped its targets – raising it to 640p for Wellstream and to 500p for Wood – citing the strength in the oil price, and the likelihood of increases in the sector's profitably.

further afield, Inchcape was 2.5 per cent or 0.78 p better off at 32.51p amid hopes for Russia, the car dealer's "most important 'emerging' market", according to Société Générale. "The Russian new car market was down only 7 per cent in March. This follows the start of a scrappage scheme on 8 March, alongside improved credit market [and] consumer confidence," the broker said, noting that Russia was "one of the key drivers for investor sentiment". "It is the most important element of the group's medium-term growth strategy," SocGen added, raising its full-year forecasts by 2 per cent.

The iron ore pellets specialist Ferrexpo also rose, gaining 7.7p to 369p, partly owing to the strength of sentiment in the mining space, and partly owing to Morgan Stanley, which initiated coverage with an "overweight" recommendation and a 406p target price. The company's structure, the broker said, allows it "to process all the iron it mines and convert all production into pellets, which in turn improves operating margins".