Market Report: BP sets the pace as US worries recede

It has been a bumpy ride for BP shareholders since the Gulf of Mexico oil disaster in 2010, and there are still plenty of problems to overcome. But oil experts think it may have turned a corner. The oil giant found itself on top of the pile on the flagship index yesterday as investors bet that it is unlikely to now face a gross negligence case in the US.

The shares gushed up 11.8p to 453.5p after rig contractor Transocean agreed to pay a lower-than-expected fine of $1.4bn (£864m) to settle the charges from the Gulf of Mexico oil disaster.

Alejandro Demichelis at Exane BNP Paribas argued that the outcome for Transocean meant it "could be difficult to pursue a gross negligence case against BP when the main contractor at the well is simply pleading guilty to negligence".

Fines may not be as much as feared but they will still be hefty – RBC Capital's analysts estimate $55.1bn of total liabilities. Mr Demichelis retains his outperform – or buy – rating on the stock, with a target price of 575p. He says he sees BP as a "key restructuring story in the oils space with a compelling valuation". He adds: "The gradual removal of the uncertainties surrounding the company should help narrow the valuation discount and refocus investors' attention on the operational improvement of BP."

The FTSE 100 index was led down in morning trade after news the previous night of the United States Federal Reserve's latest FOMC minutes. The committee signalled it would slow down or halt its bond-purchasing programme. But the flagship index shot up after American jobs figures were announced.

Michael Hewson, senior market analyst at CMC Markets, said: "Rather perversely, the fact that the jobs numbers were disappointing has seen markets push higher, with the FTSE 100 hitting its highest levels since May 2011 when it touched 6,100, on the basis that the small rise in the unemployment rate to 7.8 per cent makes it less likely that the Fed will look at stepping back from QE in the shorter term."

The benchmark index ended up 42.5 points to 6089.84.

Mining stocks were out of favour, and Mexican-based precious metals miner Fresnillo was the second-worst faller, down 75p to 1,810p, after analysts at UBS cut their rating from buy to neutral.

Retail property specialist Hammerson suffered as Credit Suisse analysts took their red pens to the stock and cut it to neutral from outperform. The shares lost 3.8p to 493.3p. Credit Suisse's Steve Bramley-Jackson gave it a share-price target of 500p, and thinks its earnings growth of 2012 is now largely factored into the valuation.

Moving on to the banking stocks, Investec's Ian Gordon, a perennially gloomy banking expert, thinks 2013 will not be happy for shareholders of RBS. This year is supposed to be the one in which the banks and the City recover.

Mr Gordon thinks RBS's recent share-price rally is not justified. He has retained his sell rating on the stock for the past few months, and prefers Standard Chartered, Barclays and HSBC, thinks it is crazy that RBS now trades in line with a "profitable and more defensively positioned Barclays".

In one of his typically gloomy notes, entitled Prepare to Meet Thy Doom?, Gordon forecasts that the group's profit before tax will fail to return to pre-crisis levels even by 2015, with growth muted and costs continuing to hit the balance sheet. He has upped his price target to 290p from 265p, still well below the 333.8p share price, which added 1.4p yesterday.

For us taxpayers and the other shareholders in the bank there could be some upside… eventually. Gordon admits he is "positive on the RBS turnaround project", which he thinks will create a "repositioned business capable of achieving returns covering its cost of equity" but he doesn't expect this to be achieved, on a reported basis, before 2017.

Mid-cap index property website Rightmove was strongly rumoured to be placing about 2.5 million shares, traders speculated — Numis Securities was linked to the placing. The shares jumped 15p to 1,475p. Rightmove has grown from a £425m company when it floated in 2006 to one valued at more than £1.5bn.

Numis' analysts were busy looking at motor insurance group Direct Line. They think the Government's whiplash clampdown should be a significant temporary boost for the group, and raised their price target to 265p. The shares reversed 0.7p to 214p.

On to the pubs. Punch and Admiral Taverns were in the news. Admiral has been sold by owner Lloyds Banking Group to the US based private-equity firm Cerberus in a deal worth £200m, including debt. Lloyds took control of the troubled pubs group back in 2009.

Meanwhile Punch, which owns about 4,500 pubs, saw its shares gain for the fifth day in a row. The business has been trying to restructure its finances and reduce the number of pubs it owns. The shares toasted a 1.1p gain to 9.9p.

Buy

Restaurant Group

Gobble up shares in Restaurant Group, Canaccord Genuity's Wayne Brown says. The Chiquito and Frankie & Benny's owner has been refocusing its estate to concentrate on retail parks rather than high streets, and Mr Brown thinks it will report strong sales next week. He gives the shares a target price of 440p and the shares gathered up 1.9p to 386.2p.

Sell

Marks & Spencer

Flog your shares in Marks & Spencer, Investec's shop experts reckon. They expect its trading update next week to reveal weak like-for-like sales. They think only M&S Food will perform well, and give the retailer a share price target of 275p." The shares declined 12p to 376.4p.

Hold

Anglo American

Hang on to shares in miner Anglo American. Liberum Capital's Ben Davies insists. He has downgraded his earning estimates for 2012 and 2013 by 6 per cent and 12 per cent respectively because the labour situation in South Africa remains difficult. He gives the shares a target of 2,000p. They fell 12.5p to 2,002p.