A week in which London’s benchmark index hit a three-month high was marked by a debate on whether it could extend its gains.
The FTSE 100 gained 0.6 per cent over the week to 5,030.4, its highest position since March 4. The mid-cap FTSE 250 index firmed 0.8 per cent to 7,264.2 over the period.
Oils and banks were the major drivers on the FTSE 100, although the biggest gainer was the IT hardware sector, which rose 5 per cent.
“The relative valuation case (for UK equities) looks strong, particularly in light of the latest fall in bond yields,” said Ian Richards, equity strategist at ABN Amro.
“But investors hoping for a re-rating of equities are likely to be disappointed. With the Fed raising interest rates, draining the liquidity support out of global asset markets, the rating of the UK market is unlikely to see significant expansion. Instead it is corporate earnings growth that is set to drive returns.”
On Friday, the FTSE 100 closed up 21.2 points, 0.4 per cent, while the FTSE 250 index rose 44.9 points, 0.6 per cent. Volume was 2.4bn.
Reuters gained 1.7 per cent to 407p on the back of earnings upgrades from ABN Amro. The broker said fears over costly investments on consumer-oriented products were overdone and it expected to see continuing recovery in revenue growth. Following the sale of Instinet, ABN said Reuters could afford a £1bn share buy-back.
Technology stocks were boosted by a positive outlook from Intel, the world’s largest chipmaker. ARM Holdings added 4.7 per cent to 116 ¼p, LogicaCMG firmed 0.9 per cent to 171p, while Wolfson Microelectronics added 3.3 per cent at 156p.
CSR rose 5 per cent to 400p on speculation that the Bluetooth chip provider could have won the business to provide Sony’s Playstation 3 with Bluetooth technology. CSR is currently the only company with the enhanced data rate (EDR) technology due to be used in the new version of the games console.
Emblaze, the video streaming company, firmed 5.4 per cent to 167p on talk of a significant deal on Monday.
Scottish Power moved 3 per cent higher to 478p after Merrill Lynch raised its rating on the utility to “buy” from “neutral”.
It was a bad day in the reinsurance sector. Alea Group slumped 18.9 per cent to 150p after the Bermuda-based company said it was considering raising additional capital to prevent AM Best, the US ratings agency, from cutting its financial strength rating.
Benfield Group fell 8.2 per cent to 254p after the reinsurance broker said profits this year would be lower than 2004 amid “unprecedented changes in the insurance industry”. “We remain concerned a full recovery in Benfield’s earnings may be some way off given . . . declining reinsurance and insurance rates,” said Nick Johnson, analyst at Numis.
Amlin led the rest of the reinsurance sector lower, down 3.3 per cent to 174p.
Hanson rose 2.3 per cent to 522p as analysts at Dresdner Kleinwort Wasserstein highlighted a positive read across for the company from the US cement company Texas Industries which reported strong third quarter results. US cement prices are expected to increase further and Hanson derives almost half of its profits from the US – mainly Texas and California.
Eurotunnel fell 1.5 per cent to 16.75p following the resignation of the chief executive of the chanel tunnel operator, Jean-Louis Raymond.
GW Pharmaceuticals slumped 26.2 per cent to 70½p after the drug development company lost its appeal against demands by regulators for further data on Sativex, its cannabis-based treatment for multiple sclerosis sufferers. See more on GW Pharma
Julie Simmonds at Nomura said she “continued to believe Sativex had significant potential” but said the cash position of the company had to be clarified. She cut her rating from “buy” to “sell”.
Ms Simmonds also cut her rating on Provalis from “neutral” to “reduce” after the healthcare group warned of a delay in the launch of its flagship product. Shares fell 17.9 per cent to 4p.
First Calgary Petroleums fell 16.6 per cent to 365p as investors grew concerned by comments from the Aim-listed energy exploration group. It warned there was no guarantee that ongoing talks with Spanish oil major Repsol over a joint venture to develop one of First Calgary’s gas fields in Algeria would lead to a deal.
Employee benefit group Vebnet jumped 15.2 per cent to 197½p after signing a deal with life assurer Prudential.
The list of quoted architects rose to two after SMC Group made its debut on Aim. The shares gained 12.8 per cent to 48½p.
Also debuting on Aim yesterday were Renova Energy, a US-based producer of ethanol, up 22.5 per cent to 84½p; Australian power group Novera Energy, 5.2 per cent higher at 61p; and North American Banks Fund, which aims to finance banks, up 6 per cent at 291p.