Housebuilders were in focus following a fairly upbeat trading statement from Persimmon.
The company - Britain's biggest housebuilder by market value and the first to update investors on its first half - said sales volumes since the end of April were ahead of the same period in 2008. House prices were now stabilising in some areas, it added, and the level of cancellations was at an historic low. Nor does it expect to have to write down the value of its landbank any further. However it did sound a note of caution about the outlook "until mortgage availability improves further and employment prospects stabilise".
Still, that was enough to lift its shares by 27p to 390.25p, and prompt a buy recommendation from Panmure Gordon. The broker said:
"Persimmon's trading statement reads well. Although completions in the first half were down year on year, forward orders are now ahead at £700m (versus £650m at the same time last year). The company also continues to generate cash and has further reduced its debt levels. With a well balanced seven-year landbank, strong management, a healthy financial position and improving sales trend, currently we have Persimmon as our key buy recommendation in the housebuilding sector."
Charles Stanley was also positive on the shares, albeit on a longer term basis. The broker said:
"In the past housing demand has been impacted not by the level of unemployment, but by the rate of change in unemployment. This is understandable, if buyers are wondering whether they will be unemployed in a year's time. It is consensus now that UK unemployment will rise above 3 million from current levels of around 2.3 million. Our view has been that, while this number may be referred to frequently, it will still be a shock as we move towards that level, and that this is likely to be negative for demand and for house prices and for investor sentiment on the sector.
"On that basis we believe that share prices in the sector are likely to fall before rising again once some sort of bottom in house prices is actually in sight, and once mortgage availability has started to pick up.
"Therefore we do not believe that now is necessarily the best time to buy [Persimmon] shares. However, on a 12 month view we believe the shares should be ahead of current levels and maintain an accumulate recommendation."
After yesterday's upgrades on a number of builders by analysts at Royal Bank of Scotland, the Persimmon news continued to buoy the market. So Bovis Homes was 16.75p better at 406.5p, while Taylor Wimpey was up 1.5p to 35p. Barratt Developments, which today confirmed Game Group's David Thomas as its new finance director finished 10.75p ahead at 160p.
In another day of thin volumes the FTSE 100 ended down 7.91 points at 4187.00. The leading index came off its best levels following an early fall on Wall Street ahead of the start of the US quarterly reporting season tomorrow. Investors were rattled by talk that the US government might need to sanction another stimulus package to prop up the economy.
Takeover speculation in the mining sector refused to die down. The latest trigger was news that Brazil's Vale planned to raise $1bn from convertible bonds "for general corporate purposes." There was talk that this could be a precursor to Vale renewing its interest in Xstrata, which currently has its eyes set on rival Anglo American. Another suggestion was that Vale and Xstrata could join forces and carve up Anglo between them. Xstrata added 4p to 610p while Anglo slipped 1p to 1627.5p.
Standard Chartered rose 21p to £11.60 as Goldman Sachs raised its rating from neutral to buy and its target price from £13 to £14, to reflect the bank's presence in the Asian markets.
Morrisons rallied after a recent spate of underperformance, after analysts said the fall in the supermarket group's shares had been overdone.
John Kershaw at Merrill Lynch - the company's joint broker - issued a buy note on the business and raised his price target from 260p to 280p. He said:
"We believe that the margin story on Morrisons is very much intact and is likely to not only come quicker than the market expects but also to continue for longer as the group gains the confidence to accelerate growth and take out or dilute costs further."
Analysts at Bernstein Research are less impressed than Merrill, with a market perform rating on the shares. But they still have a price target of 260p on the shares, compared to the market price of 243p, up 2.75p.
Two businesses heading for controversial annual meetings came under pressure. Marks & Spencer fell 6p to 308.25p ahead of tomorrow's meeting when Sir Stuart Rose will face calls to split the chairman and chief executive roles.
Cable & Wireless lost 3.1p to 130.1p as corporate governance bodies urged investors to vote against the company's latest remuneration plan at next week's annual meeting. Meanwhile UBS cut its price target from 130p to 150p.
Lower down the market toy maker Character Group climbed 5.5p to 39.5p as it announced it was in talks to buy the 27.8% stake held by private equity group 3i, with a view to cancelling the shares.
Clapham House, best known for its Goumet Burger Kitchen restaurants, fell 4p to 67.5p. Full year profits slipped 18%, partly due to a poor performance at its Tootsies chain. Singer Capital Markets said:
"The company has written-off all of the acquisition goodwill in Tootsies of £24.2m and now it is in the books at about £5.5m. This makes it more likely to be sold."
Finally Omega Diagnostics rose 1.25p to 25.25p after full year profit before tax more than doubled to £270,000. Analysts at Cenkos issued a buy note with a 44p a share target.
