Market Report: Whitbread rises as bear changes heart

Broker support boosted Whitbread as the FTSE 100, buoyed by some good news in the banking sector, firmed up to close at a 21-month high last night.

The owner of the Premier Inn hotel chain saw its shares rise by 21p to 1,540p after Société Générale, one of the last bears when it comes to the hospitality group, turned bullish after a recent meeting with management. The broker abandoned its "sell" view, conceding that Whitbread had "weathered the crisis surprisingly well", managing to hold on to average room rates at Premier Inn, while at the same time extending the reach of the Costa coffee shop chain, with the "pace of expansion largely offsetting the expected decline in unit revenues".

"When the cycle turned, we were worried that Premier Inn would lower its prices given that many of its competitors were offering discounts. Prices were not cut, however, except for some highly effective promotional campaigns designed to support weekend occupancy rates," the broker explained, adopting a "buy" view. "For the current year, we now forecast a small 1 per cent increase in Revpar [revenue per available room] at Premier Inn versus a 3 per cent decline previously, while we retain our estimate of a 3 per cent decline for the rest of the market in 2010."

Overall, the FTSE 100 almost breached the 5,700-mark, touching a session high of 5,691.22 before relaxing to 5,650.13, up 7.51 points, as the expiry of various futures and options offset the impact of some positive earnings news in the banking sector. The FTSE 250 was also firm last night, closing at 10,019.77, up 15.59 points, after touching a high of 10,083.34 earlier in the session. Sentiment received a boost after Lloyds Banking Group, up more than 8 per cent, or 4.58p, at 60.13p, said it was on track to turn a profit this year. The news powered the likes of Royal Bank of Scotland, which was 2p higher 44p, and Barclays, which rose to 357.6p, up 4.7p, with analysts at Execution Noble flagging the prospect of a pre-election sell down of the Government's stake in Lloyds.

Seymour Pierce analyst Bruce Packard remained cautious, however. "In general, banks have been very bullish in client meetings post their results," he said, repeating his "sell" view on Lloyds. "Given that interest rates are at a 350-year low, it is not surprising that credit quality is improving. But UK households are around 3 times more indebted than during the early 1990s recession, and consensus forecasts for growth look far too optimistic compared to how the banks grew coming out of the last recession."

In the wider banking sector, HSBC and Standard Chartered were held back, relaxing by 1p to 680p and by 1p to 1,770.5p, with the latter coming under pressure after Goldman Sachs, highlighting the recent run of strength and headwinds to earnings, abandoned its "buy" stance. "Recent operational trends are strong and we are optimistic on the long-term outlook for Standard Chartered, but we believe that it will prove challenging for the group to deliver medium-term earnings growth," the broker said, adopting a "neutral" view.

In the mining sector, commodity issues were under pressure as options expired. There was also some caution following news from India, where central banking authorities moved to raise interest rates for the first time since 2008, reminding traders of the threat of tightening elsewhere in the world, particularly China. Vedanta Resources was among the hardest hit, falling 84p to 2,622p, while the precious metals producer Randgold Resources lost 127p to 4,810p. The Eurasian Natural Resources Corporation, which touched a session high of 1,214.06p, was also down at the close, shedding 3p to 1,160p, while Xstrata lost 27p to 1,143p.

Defensives were out of favour, with the power plant operator Drax losing 7.2p to 363.3p, as bid rumours, which began fading on Thursday, were replaced by a rush into riskier financial plays. British Gas-owner Centrica, down 7.1p at 290.9p, and National Grid, down 9p at 640p, also fell back, along with Pennon, which slipped to 523p, down 3.5p, and Severn Trent, which was marked down by 9p to 1,206p.

Further afield, the funeral homes firm Dignity was 1.6p stronger at 196.2p after Panmure Gordon, weighing on the back of the recent full-year results, reiterated its "buy" recommendation. "We maintained our headline forecasts and believe our assumptions look well underpinned given the strength and predictability of its business," the broker said, keeping its target price for the stock unchanged at 872p. "We would hope the possibility of acquisitions will increase throughout the year, although this remains unpredictable in nature."

Also on the upside, the stockbroker Collins Stewart rose by 3.5p to 79p as speculators moved in on sector consolidation hopes. There was broad agreement on the prospect for deal activity in what is widely viewed as a fragmented sector, but little consensus on who might be the first to jump on the bandwagon. Evolution, down 1.4p at 120.6p, was mentioned as a potential bidder, though traders remained uncertain.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
ebooksA special investigation by Andy McSmith
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
Life and Style
A statue of the Flemish geographer Gerard Kremer, Geradus Mercator (1512 - 1594) which was unveiled at the Geographical Congree at Anvers. He was the first person to use the word atlas to describe a book of maps.
techThe 16th century cartographer created the atlas
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot