Market Report: The defiant Footsie holds on to its gains

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The Independent Online

Wednesday's stock market surge didn't have enough power to last for two days but the benchmark index still managed to hold on to its gains to the distress of short sellers. Some City speculators thought Wednesday's 2.2 per cent gain might not even last into a second day of trading. But those who put their money where their mouth was have been burnt – the FTSE 100 was up a further 19.97 points to 6,047.34 last night.

After President Barack Obama's deal to avoid the looming fiscal cliff late on New Year's Eve, the top-flight index broke the 6,000 mark but the City is still questioning how long these gains can last.

Angus Campbell, the head of market analysis at Capital Spreads, said: "Thursday's gains have certainly been tentative and there was a degree of caution following the explosive move higher on the first day back. Investors will tread carefully from here when the outlook remains uncertain." Investors still have the eurozone debt crisis to ponder and further talks on spending cuts in the United States are due.

One trader also pointed out that the FTSE 100 has started the year up around 2 per cent every year for the past five.

In the short term, traders will be awaiting today's employment data from the United States in the form of non-farm payrolls and ADP Employment Change updates. But until volumes are back to their usual levels, it might be wise to remain a little sceptical of longer-term gains.

Whether or not the index stays above 6,000 there was certainly plenty of optimism for retail stocks. Reports of the death of the high street seem greatly exaggerated if Next's figures are anything to go by. Fellow retailers on the FTSE 250 index were perked up by Next's strong sales update with department store Debenhams finishing up 2.1p to 117.2p.

Investors who doubted Next have been proved wrong again – the shares were up 2.7 per cent to the top of the tree, up 101p to a high of 3,873p after it reported strong Christmas sales produced from its clever mix of selling through shops, online and its catalogue.

The next week is a big one for retail with three supermarket groups, Debenhams and Dunelm reporting on Christmas trade. The mood has changed and last year's fears of a retail meltdown appear overstated. Analysts think the likes of fashion retailer Ted Baker, down 7p to 1,153p, and catalogue group N Brown, off 4.3p to 367.6p, are worth investing in.

Peel Hunt rates Next, Debenhams, Ted Baker and N Brown as its retail top picks and upped the share price target for Next to 4,000p. It thinks the retailers are set to outperform in the year ahead.

On AIM, fashion follower Standard Life Investments is a dedicated follower of online retailer Asos. It now owns more than 6 per cent of the group and the shares edged up 1p to 2,750p.

Punters keen on small oil and gas businesses specialising in exploring around the Falkland Islands must have nerves of steel.

The Argentine president Cristina Fernandez de Kirchner reignited the row over the future of the south Atlantic outpost in an open letter to Prime Minister David Cameron today accusing Britain of forcibly stripping Argentina of the islands in "a blatant exercise of 19th-century colonialism".

But AIM-listed Falkland Oil & Gas, which has had problems including its discovery of wells that don't contain commercial levels of oil and gas, saw its shares rise 1p to 29.5p. Rockhopper Exploration, which has made significant discoveries in the area, gained 5.25p to 166.25p, and its partner Premier Oil, reversed just 1p to 354.2p. Desire Petroleum ticked up 0.75p to 20p while Borders & Southern Petroleum gained 0.38p to 20.12p.

Animalcare Group shares trotted up 4p to 137.5p after it said it has found a new manufacturer for its cat and dog painkiller. It had stopped production of the Buprecare single dose ampoules in July 2011 when a supplier closed a production plant.

Leni Gas & Oil, which moved up by 0.1p to 1.16p, said it is issuing High Court proceedings against Mediterranean Oil & Gas to establish the details of a deal it struck with the oil group Genel. MOG, which continues to refute claims that it misled Leni Gas when it bought its stake in a field off Malta just before the Genel deal, was 0.75p adrift at 9.88p.