Market Report: InterContinental sees Chinese hopes raised

As hopes were raised that China's new high-speed rail system will have a "transformational impact" on the country's hotel industry, investors were told to check into InterContinental Hotels yesterday following claims it will be one of the major beneficiaries of the network.

Describing the ongoing work as the "biggest transportation infrastructure project in history", Morgan Stanley said the system – expected to end up covering 18,650 miles – would "increase the mobility of the population, affecting some 700 million people".

As a result, its analysts predicted, the number of branded hotel rooms in the country could rise seven-fold and they added that InterContinental – along with its global peers Starwood and Accor – were the "best placed to take advantage of this business development, given their strong market share... and their presence in the pipeline".

Sentiment around InterContinental was given another boost by JP Morgan Cazenove, which reiterated the group as one of its top picks following last week's first-quarter results. In initial trading this helped the group touch 1,298p, but it finished in the red, closing 7p weaker at 1,277p.

It seemed as if the FTSE 100's week was going to get off to a bad start, with the arrest of the IMF head Dominique Strauss-Kahn causing concerns as eurozone ministers met in Brussels. Despite dipping as low as 5,862.16 points, the blue-chip index ended nearly level, closing just 2.18 points behind at 5,923.69.

News it had struck a deal to buy a number of assets from the US group Iron Mountain for $380m (£234m) left Autonomy at its highest price for over seven months, as the software company shifted 46p to 1,780p. Following promises it would provide a 15 per cent boost to its earnings per share by next year, Panmure Gordon's George O'Connor raised its price target to 2,033p from 1,884p, describing the acquisition as "a match made in pragmatism".

Antofagasta took the gold-medal position with an advance of 43p to 1,185p after Citi changed its rating to "hold" from "sell", giving as its reason the recent sell-off which has seen the copper miner lose 20 per cent of its share price in little over a month.

After taking a hit last week, the rest of the sector was largely in recovery as well, with Fresnillo and Kazakhmys – which said it was hoping to finalise a secondary listing on the Hong Kong Stock Exchange by the end of June – climbing 27p to 1,351p and 29p to 1,242p respectively.

The outsourcers were among the companies on the slide as HSBC warned of "growing signs that central government will promote new suppliers and put pressure on incumbents' margins". Saying they believe "consensus potentially overestimates how quickly growth might recover and underestimates the risk to margins", the broker's analysts cut their target prices for a number of companies in the sector, including Serco, which slipped back 10p to 556.5p.

On the FTSE 250, vague bid talk helped London Stock Exchange charge forwards 56.5p to 884p despite its planned tie-up with TMX receiving a blow. Over the weekend it emerged a rival consortium had made a $3.7bn offer, prompting LSE to release a statement reiterating its dedication to the merger with its Canadian peer. However, market voices pointed out it could become a potential target itself for a takeover if the agreement ends up falling apart.

There was clearly a lot of enthusiasm about the idea of Kesa Electricals leaving the UK and concentrating on its operations elsewhere, with reports that it could dispose of its Comet chain pushing the group up 9.7p to 150.7p .

Seymour Pierce's Kate Calvert said the speculation was "not a surprise given that Comet is now forecast to report losses for the full year and the strategy of late seems to have been to shrink the business". She added that "a delisting from the UK stock exchange makes sense given virtually all of Kesa's profit is generated by Darty in France".

However, there was a much better reaction enjoyed by Dixons Retail as the prospect of a potential let-up in competition on the high street meant it took to the top spot after being lifted 2.25p to 18.42p.

The wooden spoon ended up with ITE Group, with the conference organiser sliding 11.2p to 237.1p despite seeing its pretax profit for the first six months jump over 40 per cent.

Meanwhile, Enterprise Inns was drowning its sorrows ahead of today's interim results as UBS reduced its advice to "sell", warning that the pub group and its peers face "a continued difficult trading environment". The broker also cut JD Wetherspoon's rating, changing it to "neutral", and the group declined 9.6p to 457.2p.

Down on the Alternative Investment Market, the mining investment group ECR Minerals was given a boost of nearly 60 per cent as the penny stock soared 0.58p higher to 1.58p after saying a sampling programme at its gold prospect in Argentina had produced "numerous high-grade results".