Market update

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The Independent Online

The FTSE 100 – up 22.2 points at 6213.8 at 11:54 am – recovered on Wednesday as persistent strength in the price of crude boosted oil companies.



Royal Dutch Shell was up 93p at 2234p, claiming first place on the leader board. Cairn Energy was heavier by 153p at 3672p and Tullow Oil was up 34p at 967.5p.

The strength was enough to discount the impact of minutes from the last Bank of England Monetary Policy Committee meeting, which showed that members of the interest rate-setting body voted 8-1 to keep the benchmark rate on hold at 5 per cent.



Moving up



Expro International was up 20p at 1550p. Rumours in the market are suggesting that Halliburton is set to unveil an £18 offer for the company.



Mining companies also bounced back after Tuesday's sell-off. Kazakhmys was up 44p at 1836p, BHP Billiton rose by 28p to 2051p, Anglo American was up 59p to 3512 and Rio Tinto was up 34p at 6627p.



Vedanta Resources was up 53p to 2690p after UBS increased its target price for the stock to 3100p from 2600p.



"Vedanta's "best-in-class" organic volume growth now encompasses iron ore. The company have indicated volume grow in their iron ore business (listed subsidiary Sesa Goa) of 14 Mtpa to 25Mtpa in the next three years, though the development of smaller open-cut mines, all at modest capex levels," the broker said.



BAE Systems was up 4p at 459.5p after Credit Suisse came to its aid – the broker reiterated it's ‘out-perform' rating for the stock.



"The stock fell earlier this week on reports that the CEO was questioned by the FBI in the US last week in relation to the DOJ investigation (which began June 2007) into the Saudi bribery allegations. We continue to believe worries on the potential financial consequences of this are overdone," the broker said.



Moving down



The banks fell back, again. Reverting to recent form, the Royal Bank of Scotland was down 7p at 247p, HBOS lost 14.75p to 450.5p, Barclays was down 6.25p at 399.25p and Lloyds TSB lost 7p to 395.75p.



ICAP remained weak, losing 4.5p to 622p, after Citigroup reduced its target price for the stock to 720p from 775p.



"The fact that the FY08 beat was only 3% and we believe we were already at the upper end of consensus means we make no significant forecast changes here. Increased uncertainty on medium-term volumes causes us to raise our discount factor applied to cashflows and lower our target price to 720p from 775p," the broker said.



On the FTSE 250, Yell was down 12.75p at 141.25p as analysts weighed-in on the company's recent decision to halve its final dividend.



"We hadn't expected it and it removes a key valuation support. That said, the dividend cut is not all bad news. It increases the financial flexibility of the group, which is what the market wanted, and we estimate the group will be at 4.1x net debt/EBITDA by March 2010. It will be close but we don't think Yell will breach covenants," said Citigroup, cutting its target price for the stock to 333p from 360p.



Credit Suisse also reduced its target price for the stock, to 140p from 275p.



"The main positive catalyst could be a refocusing on private equity interest in directory publishers, although this is an unlikely possibility in our view, as discussed in our 12 May Daily regarding Private Equity feedback. Meanwhile, negative earnings risk remains, as does risk of breaching covenants and further dividend cut risk as online migration continues to erode the traditional directory publishing model," the broker said.

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