Market report: Friday close

By This Is Money
Updated: 12:03 EDT, 15 September 2006

Smokes group Imperial Tobacco surged 17p to 1830p after telling investors trading in the past 12 months has been in line with its expectations.

The world's fourth-biggest cigarette firm, due to unveil full-year figures at the end of next month, reported strong growth in the UK - where it markets Britain's top-selling brand Lambert & Butler - and said its share of German cigarette sales was up. Although both those markets are in overall decline, they account for some 60% of Imperial's business.

Things should get better, too, says Deutsche Bank. Imperial, the broker says, is Europe's cheapest tobacco stock, is exposed to European markets where pricing trends are positive and sells a relatively high proportion of low-price cigarettes, a growth category. Deutsche has upped its target on the shares to 2100p from 1900p.

Nonetheless, London's index of leading shares was in a lull today, the FTSE 100 slipping 0.22 to 5877. Brokers say there are still inflationary pressures within the economy that need to be quelled and it is feared the Federal Reserve may be required to raise interest rates yet again before Christmas.

Some relief on the inflation outlook has come from recent energy-price falls, with crude down around 20% on early-August peaks of nearly $80 a barrel, in the region of $63.

However, that kept a lid on oil shares. Shell was flat at 1789p while BP - whose large shareholders are understood to be seeking assurances that recent safety gaffes in the US are not symptomatic of a systemic problem - dropped 11½p to 579½p. BG Group, which Morgan Stanley has picked out as offering growth rates 'well above the sector average', fell 18p to 650p.

Going forward, continuing support for shares could come from a host of merger stories. Merger speculation is likely to continue to linger around National Express, ahead 2p at 883p, and Stagecoach, 3½p better at 126½p. Shares in the two transport companies rose yesterday amid speculation that they could join forces.

Rumours of private-equity interest in housebuilder Redrow, up 12p at 586¾p, are likely to continue to underpin its shares.

Meanwhile, Biotrace International, which manufactures and supplies industrial microbiology products, jumped 20½p to 118½p after it received 'a number of preliminary approaches'.

John Laing was on the slide, off 7¾p at 323¼p, partially reversing yesterday's surge on news of a takeover approach.

Talk is that specialists in the secondary market for Private Finance Initiative projects are in the frame, including Henderson Private Capital and i2, a joint venture between Barclays and Société Générale. Laing's biggest current interest is the rejuvenation of Barts Hospital. Traders are not ruling out a foreign buyer, including Abertis, the Spanish construction and infrastructure group that owns Luton Airport.

Cambridge-based design engineer Aveva jumped 124¾p to 506p after upping its profit forecasts for the full-year thanks to 'unprecedented demand' for its products and services, which include designing most of the world's biggest nuclear, gas and electricity stations. The company said the Asia-Pacific region is showing 'exceptional performance' and its full-year results will be 'materially ahead' of its previous expectations.

Isotron is cleaning up from its ability to sterilise medical products. Revenues for the year to 30 June bubbled up 15% to £45.6m, sparking an 11% rise in pre-tax profits to £11.3m. The shares rose 28½p to 640p.

AIM-listed Alexander Mining slipped slightly before settling back at 22p despite an upbeat report on its Chilean copper and silver project. Company sources say production could start around the end of this year, which would mean it would have achieved start-up within two years of launching exploration activities - - much quicker than the industry norm of around five years.