Market update

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The Independent Online

The FTSE 100 was up 17.2 points at 6085.3 at 11.48am on Friday. British Airways was lodged at the top of the leader board – the airline, which recently announced an increase in its fuel surcharges, gained more than 7 per cent or 16.5p to 231.5p as the oil price relaxed. Fortunes were also reversed in the banking sector as leading stocks rallied from Thursday’s lows – Alliance & Leicester, at third place on the FTSE 100, added 20.75p to 441p and Barclays, at eighth place, rose by 11.25p to 388.75p.

Moving up



Vague bid speculation was evident around Standard Life, which was up 7p at 249.5p.



On the FTSE 250, DSG International gained 2p to 58.5p. The company was helped on its way by rumours suggesting bid interest from Best Buy, the American retailer which recently signed a joint venture agreement with the Carphone Warehouse. Comments by Morgan Stanley, whose analysts said the speculation was plausible, also drew investors.

"...many dismiss [reports] that Best Buy/Carphone Warehouse will launch a joint bid for DSG, but we think the new JV needs to make an acquisition," the broker said, putting the company on its "buy" list for the first time.



Informa, which added 10p to 382p, continued to derive strength from bid speculation, which resurfaced on Thursday. The talk on Friday pegged interest from a private equity firm, possibly Apax Partners.



Taylor Wimpey mounted a slight recovery, gaining 1.5p to 87p, after heavy losses on the day before. The stock was helped on its way by Goldman Sachs, whose analysts upgraded the stock to "neutral" from "sell".



"We are upgrading Taylor Wimpey to Neutral and removing its shares from the Pan European Sell List following recent strong underperformance," the broker said, but added:



"We maintain a negative view on Taylor Wimpey’s high gearing, weak operating margins, and susceptibility to an accelerating downturn in UK housing as tighter mortgage credit contributes to weaker demand and pricing."



Moving down



BG slipped by 41p to 1253p. Beyond the weakness in commodities prices, which also hit the wider oil & gas sector, BG was hurt by news from Australia: Origin Energy rejected the company’s A$13.6bn bid, surprising many market watchers who had expected a positive announcement instead.



In the wider sector, Tullow Oil was down 28.5p at 893.5p and BP lost 11p to 601.5p.



Miners were also down. The Eurasian Natural Resources Corporation was down 34p at 1447p, Xstrata lost 58p to 3982p and Rio Tinto was weaker by 44p at 6136p.



On the FTSE 250, Logica was down, losing 2p to 121.75p, after Lehman Brothers downgraded the stock to "underweight" from "neutral".



"We downgrade Logica to 3-UW, factoring in the execution risks from the restructuring program, limited margin upside and limited potential for a multiple re-rating," the broker said, adding:

"We find downside risk to the operational targets of the restructuring program: 1) Off-shore ramp-up might lead to redundancies resulting in margin dilution or higher restructuring costs and 2) O/S growth projections seem aggressive in an uncertain environment…The revenue profile [is] highly exposed to cyclical services [and] remains a concern."

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