Market update

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The FTSE 100 was down 11.3 points at 5996.3 at 12:05 pm on Tuesday. Weakness among commodities stocks offset some strength in the banking sector, where the Royal Bank of Scotland led the way – early chatter suggested that the Children’s Investment Fund, the London-based hedge fund founded by Chris Hohn, was building a stake in the bank, which gained 4.2 per cent or 9.5p to 235.5p.

FTSE 250-listed Bradford & Bingley, which posted an £8m pre-tax loss for the first four months of the year yesterday, was flat at 67p. In the wider sector, Lloyds TSB was up 6p to 383.25p and HBOS was flat at 360p.

Moving up

BG, the oil and natural gas giant, gained 28p to 1269p after announcing a deal to supply liquefied natural gas to Petrobras, the Brazilian oil producer.

New contract news also lifted Amec, the engineering group, which gained 24p to 872.5p. The company has entered in to a strategic global projects agreement with BP; under the terms of the contract, Amec will provide engineering and project management services to BP's offshore developments.

The retail sector mounted a recovery after yesterday's sell-off and the Home Retail Group, which gained 6.75p to 23p, led the way, claiming fourth place on the FTSE 100. Kingfisher was up 2.4p at 136.5p and Next added 18p to 1151p.

A positive broker report helped Prudential, the life insurance group which gained 8.5p to 663.5p. Merrill Lynch added the company to its list of most preferred insurers, citing the relative set back in the stock in the last few weeks.

"Recent results and trading statements have confirmed many of the factors behind our growth and management orientated investment thesis. The shares have generally performed well against the sector this year but have seen something of a dip in recent weeks," the broker said, adding:

"The shares are trading on 1.4x embedded value, 7.4x 2009E EV earnings and 15.0x 2008E IFRS earnings, all of which we believe are attractive. With regards to the latter, we can back out a PE of around 20x for the Asian business, which given the immaturity of most (10 out of 13) of the regions is excellent value, in our opinion. Prudential is one of our few life orientated Buy rated stocks at present and we see significant potential upside to our 810p price objective"

On the FTSE 250, renewed bid speculation boosted Informa, the business to business publisher. Beyond the talk, the stock was helped by a positive report from JP Morgan. The broker initiated coverage on the stock, setting an "over-weight" rating with a 525p target price.

"We are generally positive on professional & B2B publishing and neutral on advertising agencies. The cyclical downturn poses a challenge to growth in all but the most defensive sub-sectors (e.g. science and humanities publishing). Meanwhile professional & B2B publishers have harnessed the internet with proprietary content, and agencies gain 15-20% of revenue from online marketing, which is growing above 20 per cent," the broker said, adding:

"We believe Informa's revenue streams are more defensive than commonly perceived, and we see 6-9% organic growth and a flexible cost base leading to cash generation and debt reduction below 4x."

Informa gained 15.25p to 384.25p, claiming first place on the mid-cap leader board.

Moving down

The Eurasian Natural Resources Corporation, which lost 49p to 1395p, was stuck at the bottom end of the FTSE 100 – traders cited rumours that Kazakhmys was planning to offload its 14.6 per cent stake in the company.

The remainder of the mining sector was also weak as commodities prices eased off highs. Vedanta Resources was down 89p at 2416p, Antofagasta lost 13.5p to 679p and Xstrata was down 55p tat 4008p.

On the FTSE 250, Barratt Developments remained weak, losing 7.75p to 159.75p despite renewed dealing room rumours of a possible management buyout plan.

Yell, the directories group which has been dogged by concern about the level of debt on its balance sheet, was down 3p at 115.5p after UBS reduced its target price for the stock to 135p from 150p.

"By halving the dividend, Yell's liquidity is manageable for the next 12 months, but we see a shortfall thereafter as debt repayments start to ratchet up meaning Yell may have to remove the dividend completely, contemplate asset sales at depressed valuations or consider a rights issue. These issues are likely to weigh on the shares," the broker said.