Wolseley engineers a rise

Published on Wednesday 21 October 2009 21:00

LONDON FTSE 100 CLOSE 5,257.85 +14.45

PLUMBING group Wolseley has had a difficult year, with a collapse in the housing sector causing shares to plunge from more than 40 in January to less than 10 in April.

But yesterday the Reading-based firm was one of the FTSE 100's strongest shares after a rating upgrade and supportive comments from Merrill Lynch.

Analysts at the investment bank improved their stance on the shares from "underperform" to "buy", predicting that with their bullish view on the economy, Wolseley "will return to sustainable growth in the next 12 months", justifying a 2,100p target price.

Traders took the bait, pushing Wolseley up 41p to 1,455p.

Once again, trading on the London Stock Exchange opened weakly, but shares were boosted by a strong start in New York.

Morgan Stanley continued the Wall Street bank reporting season, unveiling better-than-expected third-quarter figures and helping provide some momentum in London.

The FTSE 100 dropped almost 1 per cent early in the session, but recovered to close almost 14.5 points higher at 5,257.85.

Banking shares eased after Bank of England Governor Mervyn King's speech in Edinburgh on Tuesday night, which called for banks' retail functions to be hived off from riskier parts of the businesses.

Royal Bank of Scotland fell 0.75p to 45.8p and Barclays dropped 1.2p to 364.95p.

Lloyds Banking Group slipped 0.15p to 91.5p amid claims the company is on the verge of being given approval to avoid the government's asset protection scheme.

Food retailers took their lead from Tesco, after Nomura flagged up the chain's growth potential, particularly in the UK. Tesco shares rose 8.95p to 392.45p, while rival Morrisons lifted 2.7p to 275.8p and Marks & Spencer gained 3.2p to 349.7p.

But Sainsbury's was down, with speculation in recent sessions that Qatari investors may be planning a bid leading to profit-taking yesterday. Its shares closed off 2.1p at 345.7p.

Insurer Admiral topped the risers' board, up 36p to 1,095p following a reassuring trading update earlier this week.

Telecoms were also in vogue, with BT climbing 2p to 137.7p and rival Cable & Wireless up 3.8p to 143.6p.

Cadbury, the confectionery giant, gained 1p after posting better-than-expected revenue growth of 7 per cent for the third quarter. Analysts are now tipping that Kraft, which had its 10.2 billion approach for Cadbury rejected, will need to offer substantially more than its initial 745p a share. Cadbury closed up 1p at 799.5p.

Merrill Lynch also gave a boost to the property sector. Land Securities – upped to "neutral" from "underperform" – gained 13.5p to 660.5p, while Hammerson – moved to "buy" from "neutral" – rose 2.4p to 424.4p.

Companies going ex-dividend were among the biggest fallers, with engineering group Smiths down 37p to 932.5p, and BAE Systems dropping 10.8p to 316.1p.

Among the mid-cap companies, Drax, the operator of the UK's largest coal-fired power station, rose 2.1 per cent to 465.8p after reassuring that it is on track to hit market forecasts.

On Aim, Omega Diagnostics fell 3p to 33p. The Scots medical diagnostics group announced on Monday that it had received a takeover approach, but said after trading closed last night that the talks had been terminated.

Desire Petroleum said it had conditionally raised 42 million through a share placement, with the funds to be used for a drilling campaign on the North Basin of the Falkland Islands. Its shares eased 0.5p to 84.5p.