Market report: Wednesday latest

By Mickey Clark for MailOnline
Updated: 12:16 EDT, 25 October 2006

Investors have been gorging themselves on the big food retailers as they begin their run- up to the vital Christmas trading season.

Shares of the big three supermarket groups - Tesco, Sainsbury and Wm Morrison - are trading at record highs as investors try to work out which will come out on top in the New Year.

Sainsbury continues to attract plenty of institutional support, with its shares breaching 400p for the first time in four years amid a growing conviction that its recovery programme remains on track. Today they rose a further 2¾p to 399½p.

Chief executive Justin King, parachuted in to revive the ailing chain's fortunes, reported a couple of weeks ago like-for-like sales growth of 6.6% for the 16 weeks to 7 October. He is now two years into a three-year recovery plan, but his real test is whether he can grab back food and fuel market share from the others.

Since the turn of the century, Sainsbury has been shown a clean pair of heels by Tesco and even Asda, now part of giant US retailer Wal-Mart. Profits have improved at Sainsbury, and non-food sales now make up some 10% of the total, but it must show the City it can continue to generate growth once the recovery programme ends. There has again been talk the Sainsbury family is looking to sell its 30% stake.

Tesco firmed 4¾p to 396¼p, and Morrison ½p to 259p.

Shares generally gathered pace after a slow start, to climb above 6200 for the first time since February 2001. Wall Street's record-breaking run gave way to profit-taking this afternoon, with the Dow slipping 2.90 to 12,125.0. In thin trading, the FTSE 100 index rose 32.1 to 6214.6.

Standard Chartered was marked 6p higher at 1460p after an upbeat presentation this week to broker UBS. The international banking group has also been fuelled by talk of further stakebuilding. Dubai-based Istithmar recently bought a near-3% holding, but may well be keen to take its stake closer to 20%.

Whitbread extended yesterday's gains with a rise of 16p to 1421p, helped by bullish comments from Cazenove about yesterday's half-year profits. Word is the broker has put a sum-oftheparts valuation of 1900p on the leisure group. Speculators are not ruling out the possibility of a bid from a venture capitalist.

GlaxoSmithKline jumped 22p to 1511p amid speculation the drugs giant may announce the disposal of its consumer healthcare business along with tomorrow's third-quarter results. But Japanese broker Nomura says it is unlikely Glaxo will sell the business, despite its attractive valuation, because it has always said it wants to expand it.

Medical equipment steriliser Isotron jumped 61½p to 746½p after receiving an unsolicited offer from its larger rival Synergy Healthcare, up 11½p at 695p. The all-share offer of 1.09 Synergy shares for every Isotron puts a value on the deal of 750p a share, but the cash alternative is worth 700p.

Isotron is expanding in Ireland and Thailand and has its eyes on China.

Analysts at Arden Partners say other bidders could emerge. Northgate Solutions slumped 11p to 82½p following the breakdown of bid talks with several suitors. Northgate has a price tag of almost £500m.

Engineer Senior firmed ¾p to 62½p despite being downgraded from overweight to neutral by Bridgewell, which believes the shares now look fully valued.

The broker pointed out that while Senior's aerospace and industrial businesses are enjoying buoyant trading conditions, its automotive business - which represents 30% of group sales - faces a challenging outlook.

It was the first day of dealings on AIM for Astek, the designer and maker of dental products, following a placing by HB Corporate at 5p, which raised £1.25m. The price touched 6p before settling at 5.75p.