Market report: Thursday close

By Mickey Clark for MailOnline
Updated: 12:14 EDT, 29 November 2007

There was a distinct lack of enthusiasm on the part of City investors over the call for cheaper money and the surge in share prices overnight in New York, where the Dow put on 331 points, its biggest one-day gain for four years.

Shares in London were marked higher at the outset but the gains were modest by New York standards. They later boiled over, depressed by news from the housing market, but left the FTSE 100 index up 42.9 at 6349.1.

The Dow has rallied 550 points in two days, fuelled by hints that the Federal Reserve may cut rates again soon. But traders in London remain sceptical on the outlook for the US economy.

Said one market-maker: &39;This is an irrational market. The rallies are always stronger in a bear market than they are in a bull market, and the promise of further cuts in US interest rates would suggest the US economy is in a worse state than most of us thought.&39;

Alliance & Leicester jumped 50½p to 686p after writing off just £55m. The price was buoyed by further bid speculation and bear closing. Bradford & Bingley rose ¼p to 303p after reassuring the City that profits for the full year would match expectations.

Speculative buying drove Anglo-Indian Vedanta Resources up to 2275p, prompting the company to scupper speculation that it had received a takeover approach. Last week, there was talk that the Chinese had lined up a bid worth 2500p a share. The price later pared back its lead to 158p at 2192p.

Galiform, the kitchen retailer that used to be part of MFI, fell 4¼p to 98¼p after Dresdner Kleinwort placed parcel of ninem shares at 99p.

There was further heavy turnover in shares of Rank Group with more than 15m changing hands as they rose 15&frac34p to 108p. Earlier this week, shares of the Mecca bingo and Grosvenor casinos group perked up on talk that Harrah's Entertainment wanted to bid. Rank shares have been mauled by several profit warnings this year.

UBS has raised its rating on Smiths News, which jumped 12p to 105p, from neutral to buy because it reckons the shares look cheap, but it has lowered its target by 20p to 125p. The shares have underperformed of late, putting them on a significant discount compared with peers Menzies, 9½p up at 540p, and Dawson, steady on 2.8p.

The broker acknowledges the issues facing the industry but does not believe the current valuation gap is justified. Smiths trades on a 7.1% dividend yield, and a price-earnings ratio of 6.7 for 2008.

Société Générale does not reckon it will be a merry Christmas for DSG International, down 4.7p at 113.5p. It has lowered its sights on the consumer electronics retailer by 18% to 99p followingyesterday's trading update. It is also sticking with its sell rating. The broker says this is not a share for cautious investors going into 2008.

Photo-Me slumped 13¼p to 36¾p after warning that full-year results would come in &39;substantially&39; short of City expectations. The photo-imaging group blamed the shortfall on difficult market conditions, mainly in the area of manufacturing at its KIS minilab business and the imaging solutions wholesale lab business.

Johnston Press rose 5¼p to 271¼p after Goldman Sachs lifted its recommendation on the shares from neutral to buy but cut its target from 431p to 354p on valuation grounds. It thinks concerns about the group's outlook and its aboveaverage debt levels are priced in, and the shares offer good value.

The broker has revised its forecasts down to reflect a more challenging outlook for regional advertising growth, now factoring in minus 3% next year and zero in 2009.