Market report: Thursday close
City investors can look forward to another good year of returns in 2007 with the stock market expected to achieve its fifth consecutive year of growth.
The promise of a prosperous New Year comes from Mike Lenhoff, chief strategist at stockbroker Brewin Dolphin, whose 2006 year-end forecast for the Footsie 100 of 6100 appears to be bang on target. Today, it traded 0.41 higher at 6131.5 as the Bank of England monetary policy committee signalled it was leaving interest rates at 5% for the rest of the year. It accompanied a move by the European Central Bank to lift rates a quarter point to 3.5%.
The broker says the strategic outlook remains promising for equity markets despite a forecast slowdown in earnings growth to around 8%. Their performances have been 'astonishingly robust' since the spring of 2003 and appear mission bound to recoup the ground lost in the dot-com bust and, so far, nothing has put them off. It expects equities to outperform cash and bonds in 2007.
Lenhoff says: 'We doubt that the Footsie 100 can reach its former peak of 6930 next year, but we expect it to get closer to it and to end 2007 somewhere around 6550. In other words, we think equity markets will move more or less in line with our expectations for earnings and will therefore remain favourably valued.'
Another clutch of corporate deals gave investors further food for thought today and included a big jump in tobacco producer Gallaher of 211p to 1190p following a bid approach by Japan Tobacco. The buying spilled over into rivals Imperial Tobacco, boosted 192p to 2079p, and British American Tobacco, 32p better at 1455p.
But there was disappointment for shareholders of Premier Oil, which slumped 141p to 1205p, after 1126p, on learning that bid talks with a mystery suitor had been terminated. Premier's stock market value has dropped to around £952m. It was first approached in October, and the mutter from the gutter suggested the most likely suitor was Dubai Energy.
Speculative buying pushed Legal & General 4p higher to a record 157½p. Talk yesterday claimed the life assurer could find itself the target of a bid from rival Prudential. But this has now been discounted, which allowed the Pru share price to rally 28p to 680p.
The banks also began to gain momentum with Royal Bank of Scotland adding 38p at 1954p on further reflection of yesterday's trading update. Revived talk of a bid from Bank of America lifted Barclays 20½p to 707p. There were also gains for Lloyds TSB, 7p to 550½p, and HBOS 13p to 1061p.
David Lloyd leisure centres operator Whitbread traded at a record high on the back of a 7p rise to 1590p. The company has rejoined the constituents that make up the Footsie 100. It will replace nuclear power generator British Energy, 3½p cheaper at 472p, which has seen its price slump from a peak of 753½p this year following technical problems that led to the closure of all but one of its eight power stations.
Shares in little biotech specialist ReNeuron Group rose 19p to 38¾p and have more than trebled in value during the past week. It is heavily involved in stem-cell treatment and has applied to the US Food and Drug Administration to start testing its stroke therapy ReN001 on human patients.
The Surrey-based company has tested the process on paralysed rats, which were able to regain some movement after treatment.
The notable thing about ReN001 is that it does not involve the need for aborted foetuses to carry out the treatment. Brokers say if this proves to be the case, ReNeuron will have removed a hugely controversial issue and could be on to a winner.
Shares of Union Resources returned from suspension ¾p lower at 1p. It followed news that agreements at its Mehdiabad project in Iran may be terminated.
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