Cable & Wireless led the way yesterday as leading shares mounted a Wall Street-inspired rally.
The telecoms group was the biggest riser in the FTSE 100, up 7.5p to 174.3p. The company benefited from good results from the UK arm of rival Global Crossing, but the bulk of the move came after Cazenove lifted its recommendation from in line to outperform and raised its price target from 192p to 220p.
"Recent contract wins suggest the UK recovery is more than on track," Cazenove said. "These include a £40m contract with Vodafone and two major outsourcing deals, one of which is worth $120m. These suggest C&W can achieve revenue growth over and above its broadly flat target of around £2bn.
"We anticipate further contract wins and for C&W's interim results on 13 November to provide further evidence of a strong UK performance. Longer term, corporate restructuring remains likely and we believe this will serve to further highlight value within C&W shares."
BT moved higher in the wake of the C&W upgrade and a positive note from Collins Stewart, adding 9p to 319p. But financials were under pressure again with the mortgage lenders the worst hit. Northern Rock lost 33p to 639p while Alliance & Leicester fell 26p to 937.5p.
There were a number of factors at work here. House prices fell last month for the first time in two years, according to a survey from the Royal Institution of Chartered Surveyors, and lenders have started to raise their mortgage rates. Analysts said this could lead to increased bad debts.
Northern Rock is more exposed than most to the volatile wholesale markets. There have been persistent rumours it would issue a profit warning, but so far nothing has emerged.
Also hitting sentiment in the sector was the chancellor, Alistair Darling, who slammed the banks for reckless lending. However, the Bank of England yesterday loosened some of the restrictions on the banks in terms of their reserves, a move that led to a dip in three-month Libor - the rate at which banks lend to each other - from 6.9% to 6.88%.
And reports that banks that backed the Alliance Boots buyout have sold half of the £750m debt, at 95% of face value, also helped sentiment.
So after an early slide, Barclays recovered to climb 7p to 615p. But its rival in the bid for ABN Amro, Royal Bank of Scotland, dropped 6.5p to 535p. The European commission extended the deadline for examining the role in the bid of Fortis, part of the RBS consortium.
Property stocks were unwanted, with British Land down 23p to £12 after Morgan Stanley cut its recommendation from equal weight to underweight. Estate agency Savills fell 21.5p to 425.5p while housebuilder Berkeley Group lost 95p to £14.50 on the housing worries.
ITV fell 4.6p to 106.4p as Goldman Sachs removed the stock from its conviction buy list and reduced its price target from 140p to 125p after Wednesday's strategy briefing by the broadcaster.
"The strong earnings recovery we had expected in 2008, driven by the visible advertising recovery, is now deferred to 2009 as a result of additional investment in ITV2, broadband, Freesat, high definition and higher non-programming costs," said the bank.
But with a bright start on Wall Street after a smaller-than-expected rise in US claimant numbers, the FTSE 100 closed 57.7 points higher at 6363.9. The FTSE 250, however, missed out, losing 47.3 to 11,172.4.
Miners moved ahead as the US jobs figures calmed fears of a severe economic slowdown and sent metal prices higher. Lonmin added 121p to £34.26p while Rio Tinto rose 59p to £37.25 as talk of a possible bid from BHP Billiton, 38p better at £14.94, resurfaced.
Kier climbed 25p to £19.45 after the construction group reported a 31% rise in full-year profits and said work for the 2012 Olympics and other projects would keep it busy for the next three years. Numis analysts said: "Given the outperformance versus our 2007 expectations and the strength of the current order books, we are increasing our forecasts for 2008 substantially to pre-tax profits of £90.8m." It moved from hold to add.
On to the analysts' new favourite hate target, Mike Ashley's Sports Direct. The company recovered 3p to 132.75p despite Panmure Gordon cutting its price target to 80p. Remember, the company floated in February at 300p.
"We have downgraded our forecasts by up to 50% and cut our target price from 120p to 80p," analyst Philip Dorgan said. "Our new numbers are our best estimates based on 23 years' experience as a retail analyst of what happens when the wheels come off at a retailer. The company urgently needs to appoint a new chairman to bring an outsider's perspective to what is now a difficult situation."
But traders said England's 3-0 win over Russia could prompt better sales of replica football kit, to Sports Direct's advantage. That same theory did not seem to apply to JJB, however, down another 7.5p to 164p after its recent profit warning.
WH Smith will travel
With all the gloom on the high street, it is no surprise WH Smith has seen its shares suffer, down 5p yesterday to 399.25p. But analysts at Oriel Securities have issued a buy note with a suggestion the shares could reach 500p. Oriel believes Smith's travel division - its shops in motorway service stations, railways and airports - is the "jewel in the crown". It pointed to several growth prospects: Smith has signed new deals with Moto and Welcome Break, with a trial under way at Roadchef; it could also win the rights for Heathrow Terminal 3, Aberdeen and Edinburgh off Alpha Airports; and rail passenger numbers are also growing. "We think the numbers that travel produces are underrated by the market," it said. "Earnings progress is set to be extremely strong."