Market report: Yesterday's trading

By Geoff Foster for MailOnline
Updated: 02:45 EDT, 3 January 2007

Inflation-busting tube, bus and rail fare increases gave City commuters the hump as they made their way to their half-empty offices but the Footsie's fabulous performance soon put a smile back on many faces.

It opened 2007 in fine style, closing 90.1 points up at a near six-year peak of 6,310.9 as cash-rich fund managers chased the old bid favourites sharply higher and heavyweight mining stocks responded yet again to higher commodity prices.

With Wall Street closed to mourn former President Gerald Ford's recent death, dealers in London were left to their own devices. They made the most of it, marking all the New Year investment recommendations higher but follow-through demand was disappointing because Joe Public is still very much in holiday mode. Normal service will probably not resume until next Monday.

However, bulls were in rampant mood, and why not? Strategists are generally upbeat about 2007 prospects. End-year Footsie forecasts range between 7,000 (Hargreaves Lansdowne) to 5,850 (JP Morgan).

But most are in the 6,500 to 6,800 bracket. They believe merger and acquisition activity should continue to keep things rocking and rolling.

And if US interest rates move south in the short-term, optimists believe December 1999's all-time high of 6,930.2 could even come under threat before the final quarter.

Insurers reflected the market's buoyant mood with Standard Life top Footsie performer at 306p, up 10¼p. Royal & Sun Alliance added 4¾p to 157¼p and perennial bid favourite Prudential closed 11½p better at 711p. Banks performed well with HSBC, often mentioned in the same breath as Prudential, 8p dearer at 939p.

Royal Bank of Scotland rose 43p to 2036p after Dresdner Kleinwort chose it as its best buy for 2007. The broker predicted last year that no UK bank would be taken over in 2006 and has repeated that prediction for 2007. Let's hope it is proved wrong and either Bank of America or Citibank make a move for Barclays, 16p up at 746p.

As French billionaire investor Francois Pinault threatened to gatecrash the agreed £54bn merger between Gaz de France and Suez, UK utilities rose on bid hopes. Kelda made a big splash at 955p, up 29p, while Scottish & Southern Energy sparked a further 40p higher to 1594p.

Miners sparkled as the price of gold for immediate delivery jumped $4 to $640-plus an ounce. BHP Billiton, the world's biggest mining company, advanced 27½p to 962p. Lonmin jumped 87p to 3097p amid vague rumours of bid from Xstrata, 19p dearer at 2569p. Anglo American rose 62p to 2553p and Rio Tinto 37p to 2755p.

Revived talk of a bid from Emirates Airlines lifted British Airways 13p to 540½p.

Hopes that Next will confound the pessimists and roll out an upbeat post Christmas trading statement tomorrow helped the shares rise 42p to 1842p.

British Telecom buzzed 6¼p higher to 307¾p after saying it is close to breaking through the 10m barrier of broadband connections. BSkyB improved 5p to 527p. The number of Sky+ boxes installed in customers' homes has broken through 2m for the first time.

Revived rumours of a bid from Italy's Finmeccanica sparked buying of Ultra Electronics, 50p better at 1137p. Ultra's technology helps aircraft to land, keeps ice off their wings and tracks baggage at airports.

Last year's dog performer after the US banned online gaming, PartyGaming jumped 3¾p to 35½p. It signed an agreement with Playtech (14p up at 256p) whereby the gambling software maker will power gaming web sites that PartyGaming has agreed to buy from Empire Online and Intercontinental Online.

Prometheus Energy, the Aim-listed renewable energy company, put on 2½p to 95½p on news of Stanislas Yassukovich's appointment as non-executive chairman. Yassukovich was chairman of Merrill Lynch Europe from 1985 to 1991 and was deputy chairman of the London Stock Exchange from 1986 to 1989.

Air conditioning installer Worthington Nicholls edged up 2p to an all-time high of 120½p on the back of its first European contract win in Amsterdam. More than 7m shares in Scotty Group changed hands and the close was 0.125p dearer at 1.325p after Bryan Smart, former chief financial officer of Daimler-Chrysler joined the board.

• FT publisher Pearson (8p up at 779½p) is one of Panmure Gordon's top four sells of 2007. The broker believes it is neither a recovery, nor a break-up bid story.

It is overvalued on fundamentals and the US education market is not as attractive as the market believes. Its target price is 690p. Clients are also advised to sell Alliance Boots, Rolls Royce and William Morrison.