Expectations build for Wolseley

WOLSELEY, the building supplies company, was the biggest riser on the FTSE 100 yesterday after predicting that its profits would smash City forecasts.

The company admitted that the current trading environment gave it "limited visibility" about future earnings but that better than expected cost savings would boost trading profits in the current year.

Panmure Gordon warned that the fate of the company was still governed by an uncertain economic outlook.

"A positive profit warning from Wolseley should help the share price in the near term. Sentiment, however, will continue to be affected by US housing data, which we expect to remain volatile," the broker said.

Shares in Reading-based Wolseley jumped 12.5 per cent, or 181p, to 1,630p.

The wider FTSE100 was weighed down by comments from Bank of England governor Mervyn King about the state of the UK economy and a weak start to trading on Wall Street.

Britain's leading share index dropped 36.98 points, or 0.7 per cent, to 5,315.09 points, while the FTSE 250 index of mid-sized companies closed down 53.86 points at 9,387.85.

Banking stocks were in mixed form, with Barclays down 4.5p at 311.75p and HSBC 1.8p higher at 700.6p, paring some of the gains earlier in the session.

Royal Bank of Scotland and Lloyds geared up for their results with rises of 0.2p to 36p and 0.1p to 51.7p respectively.

Commodity-related companies were responsible for almost all of the falls on the FTSE 100, as a stronger dollar hit prices.

Mining companies made up all of the four worst performers, with Eurasian Natural Resources the hardest hit, closing down 40p at 1,025p. Close behind were Xstrata, off 37p at 1,055p, Fresnillo down 26p at 751.5p and Lonmin 61p lower at 1,815p.

Oil companies were also down, with Edinburgh-based Cairn Energy among the worst hit, closing off 3.1 per cent at 337p, while BP dropped 8.3p to 572.9p.

Primark-owner Associated British Foods was boosted by target price upgrades from Morgan Stanley and RBS in the wake of Monday's strong trading statement. Shares closed up 4p at 938p.

Among the midcaps, the "battle of the middleweights" continued to develop, after a leading shareholder in Babcock International appeared to question the logic of its attempt to buy VT Group.

Andy Brough, a fund manager at Schroder Investment Management, who controls about 9 per cent of Babcock's shares, reportedly said he would prefer to see deals done elsewhere.

"I don't want to have a holding which has so much exposure to defence... I'd rather have Babcock diversify into other areas," he was reported as saying.

Shares in VT Group continued to climb, closing up 4p at 664p, while Babcock rose 2.5p to 545.5p.

Oil service companies rose in early trading, in the wake of Schlumberger's bid for US rival Smith International and an upbeat note from analysts at Nomura.

The analysts upgraded their target prices on Petrofac and John Wood Group by 25 per cent and 28 per cent respectively.

Both companies opened higher, but falling crude prices saw Petrofac close down 2.5 per cent at 1,032p, while Aberdeen-based Wood slipped 1 per cent to 362p.

On Aim, Craneware, the medical billing software group, fell 2 per cent to 372.5p, as Piper Jaffray cut its rating on the shares to "neutral" from "overweight", while raising the target price by 55p to 364p.