Cairn leads market to new high

STRONG corporate news and better than expected economic data from the US pushed the FTSE 100 index to a fresh 21-month high yesterday.

Insurer Legal & General and Edinburgh-based oil and gas explorer Cairn Energy led the London market close to the 5,700 mark at one stage, although the top flight eventually fell back to close 29.1 points up at 5,673.6.

Wall Street's Dow Jones Industrial Average also made modest early advances after US home sales fell by less than expected in February, with the index 0.4 per cent ahead in morning trade.

Sterling experienced a choppy day on the currency markets, however, as a sharper than expected fall in UK inflation sent the pound plunging below $1.50 against the dollar at one stage.

February's slide in UK inflation to 3 per cent from 3.5 per cent prompted concerns that interest rates could stay at record lows for longer, although the pound eventually clawed back much of its losses. Sterling was flat at 1.11 against the euro.

Cairn Energy was the leading Footsie riser, up 8 per cent, or 30.1p, to 408.9p after flagging higher output from its Indian assets.

Meanwhile, Legal & General followed close behind after it posted an 87 per cent rise in operating profits and predicted a recovery in its core pensions and savings markets.

Shares in the group rose almost 5 per cent, or 3.8p to 85.1p, as L&G also hiked the dividend. Fellow insurer Admiral added 42p to 1,327p.

British Airways gained 6.5p, or 3 per cent, to close at 247.5p after the company said trade union Unite's three-day strike had cost it an estimated 21 million, but left its expectations for the year broadly unchanged.

But retailers featured prominently on the Footsie fallers board following a gloomy profit warning from Carpetright in the FTSE 250.

Carpetright slumped 11 per cent, or 101p, to 825p in the second tier as the firm's sales failed to bounce back in February and March after the winter's snow.

The fall knocked Home Retail Group – which owns Argos and Homebase – in the top flight, which shed 6.9p to 275p, while B&Q owner Kingfisher – the Footsie's biggest faller – dropped 6p to 227p.

Another Footsie casualty was defence giant BAE Systems, which shed 8.6p to 380.2p, or 2 per cent, as the firm suffered a broker downgrade after Monday's loss of a 4 billion deal for armoured vehicles to a US rival.

Back in the FTSE 250, defence firm VT Group rose nearly 5 per cent, or 31.5p, to 721.5p after its board recommended a takeover approach from rival Babcock International.

The offer, which values VT at 1.3bn, comes after Babcock made several unsuccessful bids for the company. Babcock shares were up 5 per cent, or 27.5p, to end the day at 560p.

BT climbed 1.5p to 124.1p despite telecoms watchdog Ofcom "urging" the former state monopoly to share its network of telegraph poles and underground ducts with rival providers to accelerate the roll-out of super-fast broadband.

Among the Scottish stocks, Aberdeen Asset Management (AAM) slipped 2.3p to close at 126.7p despite analysts welcoming the firm's pre-close statement ahead of its interim results.

AAM reported that the integration of the businesses recently acquired from RBS Asset Management was going well, while posting a rise in fee income.

SuperGroup – which owns the SuperDry and Cult clothing chains – will join the market this morning after confirming that the retail part of its initial public offering had been oversubscribed, allowing it to raise the full 5m that it had sought.