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Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:39 EDT, 26 February 2008

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Investors' confidence was buoyed today after the FTSE 100 index rose above 6000 points and steadied, closing up 87.9 points at 6087.4.

The Evening Standard's Mickey Clark

Banks led the way again as talk of a takeover bid for Alliance & Leicester and strong results for Standard Chartered helped the FTSE past the 6000 mark that it had closed just shy of on Monday evening at 5999.5.

Shares of Premier Foods, the Hovis-to-Branston pickle group, have more than halved since the start of the year as it struggles to cope with soaring grain and dairy prices and increased competition, writes the Evening Standard's Mickey Clarke.

They were on the slide again today, losing 4½p to a record low of 92½p, after briefly touching 81½p. Just recently, the company was forced to deny talk of a deeply discounted rights issue to reduce debts now approaching £1.75bn.

Panmure Gordon has cut the shares from buy to hold and slashed its target belatedly from 275p to 100p ahead of next week's full-year results. The broker made its move after finding out Premier's Bradford Bakery had not fully closed last autumn. Wheat prices more than doubled over the past year.

For the second day in a row, shares of Alliance & Leicester were showing other blue-chip stocks a clean pair of heels, leading to suggestions a bid for the mortgage lender may not be far away.

The price rose a further 45p to 600p in thin trading, having last week struck a record low of 479½p. That takes its lead during the past couple of days to 75p, adding almost £200m to the lender's market price-tag of £2.1bn.

City speculators say a bid is almost inevitable, with Lloyds TSB - a bank with a strong retail side - favourite to make the move. Along with other lenders, A&L has been badly damaged by the credit crunch and subsequent collapse of rival Northern Rock.

By its own admission, Lloyds TSB, up 15¾p at 482¼p, is always on the lookout for opportunities. Last week's profit warning from A&L may mean Lloyds already has it lined up in its sights.

Elsewhere in the banking sector, Standard Chartered climbed 124p to 1704p after full-year numbers, while Royal Bank of Scotland, reporting on Thursday, rose 16½p to 413½p. The bank, which last year bought the Dutch ABN Amro, is expected to make further subprimerelated writedowns totalling £1bn.

Shares generally climbed back above 6000 after investors took their lead from Wall Street's strong performance overnight. But volumes were low, with the bears continuing to feel the pain as prices were squeezed higher. Wall Street saw the Dow up 99 at 12,699.20 at 5pm.

Water supplier Severn Trent closed up 2p at 1425p with Merrill Lynch raising the shares from neutral to buy with a target of 1502p. Merrill says the shares, now trading 12% below their December peaks, have fallen too far.

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The company is likely to deliver reliable returns through to 2010, notwithstanding outstanding regulatory issues. The broker believes the weakness in the shares provides a buying opportunity.

Morgan Stanley has begun coverage of ARM Holdings, ¾p lighter at 100¾p, with an equalweight rating and a 98p target. It says consensus earnings forecasts are at risk in coming quarters because of slowing growth in the semiconductor industry. It has set the target at 98p, although 80p would be a more attractive level to buy the shares.

Altona Resources, down 0.25p at 5.5p, is raising £11.6m by selling 240m new shares to Tongjiang International Energy. Aim-listed Platinum Australia rose 2½p to 140p after publishing positive drilling results from its Kalahari platinum (Kalplats) project in South Africa.

Also on Aim, Stratex International firmed 0.5p to 9.12p following positive results from its drilling project at the Altintepe project in north-eastern Turkey. It has identified further gold mineralisation and anticipates significantly increasing its current 311,543 ounces of gold resource at the project.

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TOMORROW'S AGENDA

• BP chief executive Tony Hayward unveils his long-awaited strategy update. Investors hoping for a radical shake-up are likely to be disappointed, with industry experts predicting Hayward will emphasise the need to rebuild the group's underlying performance before a major strategy overhaul.

The update is unlikely to inspire Citigroup, which last week downgraded the stock, saying BP should have addressed portfolio weaknesses earlier and that its long-term growth prospects may be limited. Shareholders will also scrutinise the group's yearly report on oil and gas reserves.

• Halifax owner HBOS is forecast to post a 4% jump in annual profits to £5.76bn when it delivers full-year results. But the City will be scrutinising its outlook for the year ahead amid fears that funding pressures are hitting margins and mortgage default rates will climb. Analysts are also concerned about the group's exposure to commercial property.

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