FTSE 100 close: M&S light shines on retailers

By ADRIAN LOWERY
Updated: 12:02 EDT, 1 July 2009

A strong open for Wall St gave a further boost to the Footsie this afternoon.

Market watcher: The Footise made strong gains in the second quarter.

The Dow Jones opened 121.9 points ahead at 8,568.9 and that spurred on the FTSE 100 index to put on 91.6 points by the close at 4,340.8.

The Footsie is little moved since the start of May, however, and investors are awaiting more concrete evidence on the prospects for economic recovery before pushing the market substantially higher.

'We've been in a range for the last six weeks and I don't expect huge moves, people are looking at the famous shape of recovery, whether it will be "V" "W" or "L" shaped,' said Teun Draaisma, equity strategist at Morgan Stanley.

Mining and energy stocks dominated the risers' board after a rise in commodity prices, including a two dollar gain in the cost of oil.

Vedanta Resources set the pace with a rise of 9.8% or 127p to 1415p, while Xstrata lifted 35.9p to 693.2p and gas explorer BG improved 43p to 1061p.

Oil major BP was 12.2p higher at 490p and rival Royal Dutch Shell added 37p to 1555p.

M&S shares improved 11.5p to 317.5p as analysts upped their profit after this morning's robust sales figures, which showed a 1.4% drop in like-for-like sales in the first quarter, far better than the 2.5% fall forecasted by analysts.

Credit Suisse, however, keep an 'underperform' rating on the stock: 'The big picture remains at M&S. The company needs investment to address a significant number of legacy issues. This will hold back earnings progression as the wider economy recovers.'

Optimism on consumer confidence in executive chairman Sir Stuart Rose's accompanying statement seemed to share the love with fellow retailers. Next was boosted 57p to 1526p, B&Q owner Kingfisher 6.9p to 184.7p and Argos firm Home Retail Group 5.25p at 265.25p.

Housebuilding shares benefited from Bank of America-Merrill Lynch's positive review of the sector this morning. The broker upgrades both Taylor Wimpey and Persimmon to 'buy' from 'neutral' on valuation grounds, reflecting its conviction that all the bad news has been priced into the firms' share prices.

Taylor Wimpey was boosted 2.5p to 36p and Persimmon 5.25p to 355.25p.

Merrill Lynch also raises Bovis Homes to 'neutral' from 'underperform'. The broker says it does not believe that trading for the UK housebuilders will improve significantly anytime soon but it feels that these stocks have now been oversold.

Bovis shares added 3.25p to 373.75p and Redrow gained 6.75p to 203.25p.

National Express shares slumped 8.24%, or 25.5p to 284p, after the company failed to renegotiate its loss-making East Coast rail franchise with the Government, meaning it is likely to walk away from the service by the end of the year.

Shares in Homeserve shed 58p to 1,442p after UBS cuts its rating for the home insurance group to 'neutral' from 'buy' on valuation grounds, while raising its target price to 1,600p from 1,425p. UBS points out that Homeserve shares have risen nearly 25% over the last three months versus the FTSE 250 index, which is up around 14%.

In small caps, shares in Intercytex plunged 56%, or 6.63p to 5.13p, after it received no bids to take over the whole group. The Manchester-based company, which specialises in regenerative medicine for skin and hair, has been talking to potential suitors for several months after failing to stem losses.

But it says discussions on selling a part of the business continue.