Market Report: Upwardly mobile Footsie closes on 6,000 mark

 

A few months ago, the idea that the Footsie could soon move back above 6,000 points seemed laughable. Yet yesterday the City was switching onto the possibility of the psychologically key level being reached in a matter of days as the top-tier index set a new, seven-month high.

After being trapped in a tight range for around a fortnight, the FTSE 100 finally made a break for it and closed last night 40.18 points better off at 5,945.25. The move continues a rather remarkable run in which it has managed to add more than 800 points in less than three months. Nonetheless, traders were confident there was life still left in the rally with one saying it was "inevitable" the 6,000 point barrier would soon be hurdled.

Not everyone was so upbeat, however. Morgan Stanley's Graham Secker decided to be the party pooper, claiming – rather counter-intuitively – that there was too much optimism among investors for markets to continue their rise.

Noting that January saw equities, oil, gold and bonds all gain in value, the analyst warned this rare occurrence was "a very reliable sell signal" and that it "often preceded equity market corrections".

Such a scenario, according to Mr Secker, has only happened four other times in the last five years and three of these "proved to be a significant peak in equities".

Market bulls will have been more encouraged by JPMorgan Cazenove, whose analysts said there was "scope for the FTSE 100 to make a clear new cycle high" while highlighting a number of their favourite blue-chip stocks, including miner Vedanta Resources and insurer Aviva.

The two finished high up the leaderboard, powering ahead 46p to 1,358p and 12.6p to 382.6p respectively. The latter was also helped by Panmure Gordon, which said it – along with peer Prudential (up 3p to 724p) – was "highly geared to a recovery in the macro environment".

The financial stocks were helped generally by optimism towards Greece during the session as eurozone bigwigs began their meeting over the country's second bailout package. Royal Bank of Scotland was bumped up 0.88p to 28.48p despite Nomura keeping its "buy" advice and saying it was "cautious" ahead of the group's full-year results on Thursday.

The surprise decision by China to cut its reserve ratio for banks boosted the heavyweight miners, with BHP Billiton 54.5p better off at 2,077.5p and Eurasian Natural Resources driven up 18.5p to 722p, while it also helped oil touch its highest price for nine months.

 

The gold medal position on the benchmark index was claimed by Weir Group. The pump manufacturer spurted up 135p, or 6.58 per cent, to 2,186p as analysts at Bank of America Merrill Lynch said it was one of their top picks.

CRH was the clear winner on the FTSE 250 after the chip maker announced a $50m (£31.5m) share buyback plus an increase to its full-year dividend, and having seen its share price almost halve over the previous year, the Cambridge-based firm shot up 20.77 per cent to 275p.

Misys was not too far behind as recent rumours that the software firm – which has agreed an all-share merger with Swiss rival Temenos – could receive a separate bid proved on the money. The group announced US private equity company Vista had made an approach, and with it reportedly priced at 360p a pop, Misys jumped 20.5p to 330.1p.

 

Among the smaller stocks, all the attention was on the oil explorers following Friday's announcement that Dragon Oil (up 16.5p to 563.5p) was consideringmaking a move for Bowleven (down 1p to 119p).

The scribblers at Merrill Lynch gave a boost to those hoping for more takeover activity after predicting that "sector consolidation could gather pace in the coming months", claiming rising costs meant it was cheaper for the big companies to buy assets rather than discover and develop their own finds.

The analysts highlighted Rockhopper as a possible takeover or farm-out candidate, and the Falkland Islands-explorer climbed 11.5p to 382.75p, while Petroceltic (0.07p better off at 8.3p) and Soco International (1.6p better off at 315p) were also on the list.

At the same time, vague takeover speculation was being revived around Max Petroleum, which was lifted 29.55 per cent to 14.25p. The rumours – which traders were playing down – suggested there could be a number of possible bidders for the explorer, while there were also hopes that news from its Kazakhstan drilling could be imminent.

Elsewhere, those who had bought Xcite Energy last week on talk that a positive update from its Bentley field was on the way got their wish. The group announced a reserves upgrade, but profit taking left it 0.25p lower at 154.25p.

FTSE 100 RISERS

* Lloyds Banking Group 36.35p(up 0.89p, 2.51 per cent) Bank which announces its full-year results on Friday cuts its bonuses pot for all staff following the recent PPI insurance mis-selling scandal.

* IMI 982.5p (up 22.5p, 2.34 per cent) Engineering company manages to advance after the analysts at Goldman Sachs decide to increase their target price to 1,035p from 1,220p.

FTSE 100 FALLERS

* Shire 2,252p (down 26p, 1.14 per cent) Pharmaceuticals group ends up with the wooden spoon on the blue-chip index as investors' increased appetite for risk sees them shun defensive stocks.

* Reed Elsevier 557.5p (down 2.5p, 0.45 per cent) Publishing company succumbs to a touch of profit-taking, having enjoyed a decent rise following the release last week of its final results.

FTSE 250 RISERS

* Ocado 103.7p (up 7.65p, 7.96 per cent) Online grocer finally manages to bring an end to a seven-session losing streak, during which time its share price ended up dropping almost 14 per cent.

* Home Retail 113.3p (up 4.2p, 3.85 per cent) Argos owner still rising after being helped last week by the revival of vague bid speculation and better-than-expected high street sales figures.

FTSE 250 FALLERS

* Kenmare Resources 56.4p (down 2.6p, 4.41 per cent) Miner is knocked back after having risen over 19 per cent during the previous eight trading sessions thanks in part to vague bid speculation.

* Spectris 1,661p (down 44p, 2.58 per cent) Electrical engineer which revealed preliminary results last Friday retreats even as Credit Suisse's analysts increase their price target to 1,900p from 1,660p.

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