A dip in housebuilding shares was outweighed by a number of upbeat brokers' recommendations yesterday, giving the market a positive start to the week.
Sugar group Tate & Lyle topped the Footsie leaderboard, up 26p to 580p as Credit Suisse upgraded the group from neutral to outperform and raised its target price from 630p to 640p.
"It's either feast or famine with the Tate share price, or so it would seem," said the bank. "Either the market goes overboard on the added-value story, or it dismisses the business as being entirely commodity-based. The latter seems the case right now. Tate today looks a better quality earnings stream than hitherto, but has a rating that doesn't reflect that in our view."
British Airways shares climbed 4.75p to 438.5p after Panmure Gordon raised its rating from hold to buy with a 540p target price. Like Tate, BA's shares have been weak of late. In the case of the airline, the dips have been due to worries about rising fuel costs, a more challenging trading environment and the potential negative effect of the US/European open skies deal.
But Panmure now believes the shares have fallen sufficiently to take account of these uncertainties.
Aero engine maker Rolls-Royce rose 14p to 565p after the launch of the Boeing 787 Dreamliner over the weekend. Rolls has just announced a $1.3bn deal to supply engines for 40 of the 74 Dreamliners ordered by the International Lease Finance Corporation.
Builders were battered after a downbeat trading statement from Bovis Homes. The company reported a slowdown in visitor and reservation numbers, and said the outlook for the year would depend heavily on consumer confidence over the key summer and autumn selling period. Investors took this to mean the recent interest rate rises were finally starting to have an effect on the housing market, and sent Bovis shares tumbling 100p to 820.5p, an 11% decline.
The Bovis statement rippled through the sector, with Persimmon the leading faller in the FTSE 100, down 50p to £11.64. Barratt Development fell 23.5p to 991.5p, while Redrow lost 29p to 512p and Taylor Wimpey was 19p lower at 343p.
The effect also spilled over to mortgage bank Northern Rock, 10.5p lower at 841p.
The FTSE 100 managed to stay in positive territory, up 22.6 points to a three week closing high of 6712.7.
Chocolate and fizzy drinks group Cadbury Schweppes added 7.5p to 673p despite UBS cutting its price target from 720p to 695p. The bank said news that Kraft intended to pay €5.3bn for Danone's biscuit business meant it was less likely to be interested in Cadbury's confectionery division once the drinks operation was split off.
UBS said: "Assuming gross proceeds of $16bn for beverages, we base our price target on the weighted probability of three scenarios: the residual confectionery operation remains independent (50%; up from 40%), it merges on a nil-premium basis with Hershey (35%; up from 30%), and, it is taken over by Kraft (15%; down from 30%)."
Miners were wanted again as copper edged close to $8,000 a tonne on Chilean strike fears, and lead hit another peak. The sector was also helped by positive noises from JP Morgan. The bank raised its target price on Kazakhmys from £14.52 to £17.44, pushing the shares up 55p to £13.60. Antofagasta added 18p to 681.5p after JP Morgan lifted its price 24% to 662p.
But pharmaceuticals business Shire lost 16p to £12.35 after the same bank cut its target price from £13.75p to £13.20 and moved from overweight to neutral. JP Morgan said the company could underperform in terms of being able to successfully switch patients from Adderall XR, its attention deficit hyperactivity disorder treatment, to its new product Vyvanse.
"There is real downside risk if Shire fails to execute," the bank said. "Furthermore, we think any merger premium [in the share price] is unjustified while the Vyvanse uncertainty remains."
Lower down the market, semiconductor group IQE issued an upbeat trading statement, as forecast here on Friday. The shares added 1.5p to 16.75p as it said first half profits would be substantially above market expectations.
Dan Ridsdale at Bridgewell said: "IQE has reported that sales have picked up strongly following a flat start to the year. We reiterate our buy recommendation and 20p fair value. But we believe the shares have the potential to appreciate much further in the longer term."
IT recruitment group FDM added 14.5p to 152.5p ahead of what is expected to be a positive update this week. Analysts believe the company is seeing huge demand for its services from the likes of the major banks in Canary Wharf.
But oil exploration group White Nile, chaired by former cricketer Phil Edmonds, lost another 5p to 85p after Sudan reportedly wanted the company to withdraw from a disputed oil block in the country.