SHARES STRONGLY UP/DOWN this week 02/01/06 (Master RSI)

London’s FTSE 100 gains on oil and miners
By Philip Stafford and Peter Garnham
Last updated: January 3 2006 18:31

Observers could be forgiven for checking the date as the first day of trading on London’s equity markets in 2006 saw many of the trends of 2005 come to the fore again.

Gains in the commodity sector enabled the blue chip index to hit fresh four-and-a-half year highs, deals were completed and investors fretted about the state of the retail sector.

The FTSE 100 rose 62.7 points or 1.1 per cent to 5,681.5, its best level since July 2001, while the mid-cap FTSE 250 index added 99 points or 1.1 per cent to 8,893.3, a fresh all-time high.

Volume was fairly solid, with 2.9bn shares changing hands even though many desks were not fully staffed and investors were assessing their portfolios for the year ahead.

Despite the retail sector’s strong December - it was the third-best performing sector on the FTSE - investors again fretted over signs that all was not well on the high street.

Dealers worried that after a strong start on December 26 and 27, trading in the sales had tailed off rapidly as shoppers stayed away. Research group SPSL said the number of people going shopping between Christmas and New Year was nearly 8 per cent lower than in 2004.

Richard Ratner, analyst at Seymour Pierce, observed that: “The anecdotal evidence is telling us that in the sales, unless the reductions are 50 per cent or more, the punters are not interested. Some retailers have had to make further cuts as a result.”

The uncertainty spread across the sector, with Marks and Spencer down 1.6 per cent to 497p, WH Smith 1.7 per cent softer at 427p and Woolworths 3.9 per cent softer at 37p. JJB Sports shed 3.6 per cent at 169 ½p.

Nextlost 0.8 per cent to £15.23 on talk that many had placed short positions in anticipation of a weak post-Christmas trading update today (Wed).

Other sector updates are due in the coming weeks, with M&S next on Jan 10.

Some investors were still catching up with news over the holiday period. Rank Grouplost 3.8 per cent to 294p on profit-taking despite reports that it could return up to £300m to shareholders from the £430m sale of its Deluxe film business.

Deutsche Bank said that the price was below its forecast of £500m and cut Rank’s target price to 285p from 310p. But it added that the disposal was the right strategy.

Oil stocks across the market were higher as crude oil prices rose. Among the gainers, BG Group gained 3.5 per cent to 594½p, Venture Production rose 5.3 per cent to 544p and BP rose 2.9 per cent to 637p.

Soco International, the oil and gas exploration and production company, added 3.7 per cent to 815p on a successful production test of a well in Yemen.

Mining stocks also continued to perform, with Kazakhmys up 4.6 per cent at 809p and Xstrata 4.4 per cent firmer at £14.20.

The first trading day of the year also saw a plethora of tips for the year. Royal Bank of Scotland added 2.7 per cent to £18.02 after it was widely tipped as a top performer. Its low valuation compared to its rivals and potential share buybacks were the main reasons cited by traders for its selection.

BOC, the speciality chemicals group, lost 0.6 per cent to £11.91 after BASF, the German group, made a $4.9bn bid for US group Engelhard. Investors feared that BASF, which has been linked with a bid for BOC in the past, would now not make an approach for the UK group, although one investor pointed out that possible consolidation in the sector could force the hand of Linde, the other German company linked with a bid for BOC.

Electra, the investment trust, climbed 7.5 per cent to £12.04 after selling Inchcape Shipping Services for $285m to Istithmar, a United Arab Emirates-based investment house.

Cookson, the industrial materials group, climbed 3.2 per cent to 438½p after it sold SCS, its electronics division, for $55.5m to Bunker Hill Capital, a US private equity group. It also enabled it to hit its target of making £100m from divestments some 12 months early.

William Hill gained 4.2 per cent to 558p. In an unexpectedly upbeat trading update, it said it has bounced back from a run of adverse sporting results and consequently full-year results would be slightly ahead of expectations.

Wolfson Microelectronics added 6.5 per cent to 360p after a bullish note from Citigroup. Analyst Paraag Amin upped his price target to 416p from 255p on a stronger than expected performance from consumer gadgets such as the iPod, Xbox 360 and PlayStation Portable.

Among the smaller companies, Pan Andean Resources tumbled 11.4 per cent to 9.75p after the oil explorer admitted that a test well in Texas had met only water and had been plugged. News that the company had been unable to repair damage caused by Hurricane Rita at its High Island oil platform in the Gulf of Mexico due to a lack of equipment put further pressure on the shares. Pan Andean said it would be “several weeks” before work could start.

Gas Turbine Efficiency gained 2.8 per cent to 36½p. The cleaning systems manufacturer announced an extension to its contract with Pratt & Whitney, the US aircraft engine maker, until 2014. The deal was thought to be worth a minimum of $20m in revenue to Gas Turbine.

Shares in Innovata added 3.1 per cent to 25p on news that the drug developer had signed a global marketing deal with US pharmaceutical group Baxter International for Adept, its post-operative scarring treatment.

GW Pharmaceuticals put on 7.4 per cent to 160p on talk that the drug developer was set to announce a new deal. The shares have risen more than 50 per cent since the start of December.

Takeover speculation boosted Autologic, the car delivery and logistics group. The shares climbed 18.1 per cent to 117½p amid talk of an imminent 145p a share bid for the company.

Electric Word rose 4.7 per cent to 8.5p, boosted by the publisher’s £2.7m acquisition of SportBusiness Group, which specialises in the sports rights market. Electric Word said the deal would give it an excellent platform for growth in the run up to the 2012 London Olympics.

Ubiquity Software fell 2.8 per cent to 36½p after the company issued the first profit warning of the year. The communications software developer said full-year earnings would be “significantly below” expectations due to contract negotiation delays.

IQ Ludorum, the online betting software provider, jumped 29.7 per cent to 11.5p as investors continued to warm to the appointment of Mike Muscato as chairman on December 23. Shares have risen more than 400 per cent since the announcement on hopes that the former head of US payments group Symmetrex could transform IQ Ludorum’s fortunes.

Cardpoint, the independent cash machine operator, rallied 12 per cent to 81½p as it revealed chief executive Mark Mills had added 130,000 shares at 77p each, taking his holding to 1.9m shares or 1.9 per cent.

Niche semiconductor maker Zetex rose 1.4 per cent to 54¾p on news that chairman Elisabeth Airey had bought 25,000 shares.