ELECTION BUDGET FAR FROM GENEROUS

The clear point of interest on the economic front this week was the Budget, placed as it is about as close to the forthcoming General Election as it is possible to get. The most obvious feature of Chancellor Alistair Darling's offering was the lack of giveaways, something not too surprising given the way that the Treasury coffers have been hit over the recession. In fact, the message from the Budget is that things could actually be worse in the sense that the public sector net borrowing requirement (PSNBR) for 2009-10 at £167bn is likely to be £11bn less than the £178bn estimated at the time of December's pre-Budget report.

After all the uproar it was also notable that the banking bonuses tax could net £2bn rather than the £500m original estimate. The headline move of the Budget however was something of a Robin Hood manoeuvre in the sense that the doubling of the stamp duty threshold to £250,000 for first time buyers will be paid for by a 1% rise in stamp duty for houses over £1m to 5%. Apart from the Budget the week's main economic statistic was the sharp rebound in February retail sales, with the Office for National Statistics reporting a 2.1% rise as opposed to the 0.8% that had been expected.

Clearly with the FTSE 100 approaching two-year highs this week there was going to be an element of fireworks for leading stocks. It was also evident that some of the worst losers of the bear market that ended just over a year ago were once again the biggest percentage gainers of recent trading sessions. As far as Lloyds Banking Group (LLOY) was concerned the 16% rise will have been much appreciated by those who have backed the stock from the HBOS deal, and even the government which on behalf of the taxpayer was approaching its breakeven level of 63.2p. Director share buying above 60p also backed the bulls. Of course, when Lloyds is on the up it is usually the case that Royal Bank of Scotland (RBS) follows in the sense that both companies are perceived to be bundled together in the part nationalised mini sector. RBS provided its shareholders with a pleasant surprise in announcing a move to reorganise its liabilities in order to deliver a profits boost of as much as £1.25bn this year.

While traders have been on to the recovery argument in the banking sector, the prospect of a rebound among travel operator shares did until relatively recently appear to be stretching even the hopes of the optimists, considering that in theory holidays are discretionary spending on the part of the consumer. However, Thomas Cook (TCG) was not only in demand the day before its trading update when rival Tui Travel (TT.) was reporting, but then became the top FTSE 100 stock riser on Thursday when it reported a sharp rise in summer bookings. The drivers here were said to be the Jamie Redknapp advertising campaign for its holidays and the collapse of rivals such as Globespan.

Switching sectors again and it has been the case that oil explorer Cairn Energy (CNE) is very often in the upper reaches of the FTSE 100 outperformers, with the latest spur for the bulls being the way that it hiked its India output numbers. This along with continued speculation over Greenland drilling results gave the shares another new push into record territory. Also gapping higher dramatically was High Street fashion group Next (NXT). The driver here apart from the group having the good fortune to make the announcement on the same day as February's bumper UK retail sales data. The big plus at Next was actually the company admitting that it had erred on the pessimistic side regarding the extent of the consumer demand slowdown due to the recession. Fellow fashion retailer Burberry (BRBY) posted an almost identical stock price rebound in sympathy.

With the FTSE 100 soaring towards two-year highs, the losing stocks were sporting only token losses at best. However, there was still significant newsflow over these moves. For instance, interdealer broker ICAP (IAP) got the thumbs down from the market as it announced that it would scale back its cash equities business in China and the rest of Asia. The expectation was that the strategic review of the business would have led to its sale. There was controversy as far as British Gas owner Centrica (CNA) was concerned as it employees voting to strike over the alleged macho management style of the company, with the managing director's £1.2m pay deal off the back of a 15% increase not helping matters.

There were a couple of retailers under the cosh in share price terms with B&Q owner Kingfisher (KGF) heading south as it remained cautious on its trading outlook for 2010 despite having served up a 50% profits rise last year and raising its dividend for the first time in five years. Argos owner Home Retail Group (HOME) saw its shares marked down in sympathy. Also on the back foot were shares of builders merchant Wolseley (WOS) as it identified as many as 19 of its businesses that could be sold off over the next two years in an attempt to head off future profits dives such as the latest 34% fall in interim profits.

One of the merits of technical analysis is that it can conquer the market by number crunching in the way that conventional fundamental analysis can miss out. However, it would appear that at least for the time being hedge fund manager Man Group's (EMG) flagship AHL fund still has its algorithm-based strategy in a twist. This was underlined by this week's pre-close trading update which revealed that overall the company continues to suffer despite or perhaps because of the near vertical rise in the stock market, and the return to "normal" conditions in the market as a whole. The plus point here though, was the reaction of traders to another lacklustre update. Finally, shares in Man Group pushed higher, following the FTSE 100 to new highs for 2010.

This was off the back of evidence that the recent sales decline and institutional redemptions have started to slow. Hopefully, for battered shareholders of a financial play which has been conspicuously absent from the one year recovery we have finally witnessed the tipping point. This is the conclusion that broker Charles Stanley has come to, although for yield lovers it has pointed out that the 10% dividend may not be maintained unless the hint of a fundamental turnaround we are currently seeing actually materialises by the end of the 2010 financial year.

On the commodities front, most of the fundamental factors backing gold in the recent past became reasons to either take profits or for some even go short below the 2008 support line now at $1,105. Ideally for bulls of gold the worst will happen and the EU will back out or fudge its intervention in the Greek crisis, and it will be left to the International Monetary Fund to bail it out. There were no such problems for crude oil as even the ultra strong US dollar could not prevent it remaining near the top of the recent $83 a barrel range. While gold lost its fear factor appeal, risk appetite backed crude oil even though both Cushing inventories rose 0.75m barrels to nearly 32m barrels.

On the FX front, it was all about the euro this week as it continued to suffer the slings and arrows of the Greek debt crisis. Even though the proposed EU / IMF initiative should have defused the panic, the euro remained well down on where it started the week. The markets were really looking for action rather than the threat to act - Fitch downgrading Portugal's debt hardly helped matters. The UK currency was being swept away on the same basis as the euro, with the markets not appreciating the Chancellor's sitting-on-hands approach to addressing the deficit.

The Galvan Research Team has this week picked out insurance giant Legal & General (LGEN) as a buy. We regard L&G as a very attractive turnaround situation after a swing to profits and a substantial dividend hike, the latter underlining the fundamental recovery that the insurer has achieved. The expectation is that pricing power and cost cutting will see L&G build further earnings improvement in coming months.

Elsewhere, we reiterate our buy stance on Shire Pharma (SHP). The US FDA has this month granted marketing approval for Gaucher disease treatment Vpriv and the generally well received President Obama healthcare bill has further underpinned the fundamental position of Shire Pharma.

You can read our in depth view on this stock and a raft of research to help with your trading by visiting the Galvan website.