Market Report: Investors see calmer waters ahead for Carnival

After Carnival ended 2006 with the wooden spoon as the worst performer in the FTSE 100, shareholders of the cruise ship operator will be hoping for better things this year.

However, all is not lost. Analysts are increasingly hinting that the company may be over the worst of last year's woes, when investors deserted the stock after warnings about the impact of the weak dollar and the high price of fuel. Results in late December were better than many investors had forecast and although the pricing environment in the Caribbean remains tough, pricing is getting stronger outside the West Indian cruise market. The broker Dresdner Kleinwort believes the long-term story for the company remains very positive. The company is confident enough to have ordered its third new cruise ship in as many months yesterday, a €535m (£360m) Italian-built vessel due for delivery in 2010. Shares in Carnival topped the blue-chip leaderboard, closing 66p better at 2,681p.

Metal stocks were weaker as the price of copper dipped to below $6,000 a ton in London trade. Mining companies occupied eight of the top 10 fallers, with pure copper plays Antofagasta, 28p worse at 488p, Kazakhmys, 37p weaker at 1,087p, and Vedanta Resources, off 72p at 1,158p, among the worst hit. After strong gains in 2005 and 2006, few analysts are willing to predict another red-letter year for the mining sector.

The old story of Aviva bidding for Prudential popped up again, sending shares in Prudential to the top end of the FTSE 100 leaderboard with a 13.5p gain to 724.5p, the first time the stock has moved significantly higher than the 708p Aviva offered in March last year. Meanwhile, Aviva ticked 4.5p better to 843.5p, just short of a new five-year high.

Investors will be looking for a trading update from high-street retailer Next, due today. The shares nudged 5p better to 1,847p. The stock has not been widely touted as a big winner in Christmas trade but there are enough bulls about to push the price higher.

London shares were unable to repeat Tuesday's stellar performance but still managed to close marginally ahead despite the weak metal stocks, driven higher by a good first day of trade on Wall Street and strong demand for banking and telecommunication stocks. The FTSE 100 closed 8.1 firmer at 6319.

Shares in British Energy continued to slide, closing 17.25p worse at 508p. The company expects its Hunterston and Hinkley Point power stations to be back at full capacity by the end of March but there would be few shocks if that deadline was not met. Sentiment across the electricity generation sector is bearish with sellers also retaining the upper hand at Drax, down 43p to 761.5p.

Anyone putting their ISA allowance into the engineering firm Charter, 28p firmer at 926p, in January 2003 would now be sitting on more than £211,000, a phenomenal return by any standard. Bridgewell Securities believes there is more upside left in the stock, and initiated coverage with a "buy" recommendation and a 1,050p target price. Another stock that has come back from the brink during that period is WS Atkins, up 35.5p to 854.5p - the top FTSE 250 riser - which Dresdner Kleinwort upgraded to "buy" with a 938p price target.

In the small caps, the privately owned Southwind made a formal offer for the IT recruitment specialist Lorien, half a penny weaker at 42p, after taking its holding in the group to more than 40 per cent, triggering a mandatory offer. But the bid appears to have little chance of succeeding because Southwind is offering 40p per share to acquire the rest of the company, 2.5p lower than yesterday's opening price.

Numis Securities released its top tips for 2007 and is bullish on the advertising and public relations market. It tipped media giant WPP Group, down 3.5p to 698p, and the small cap group Huntsworth, 6.25p better at 105.75p.

A bullish note from the investment bank ABN Amro boosted rumours that Christmas trading at Land of Leather, the furniture retailer, was ahead of internal expectations. The Dutch broker reiterated its "buy" recommendation on the shares and maintained its target price of 380p as the shares closed 13.75p firmer at 355.5p.

Finally, takeover speculation at an old small cap favourite, Dragon Oil, lifted it a penny firmer to 172p. The word is that majority shareholders, Emirates National Oil Company, is considering an offer to buy the 48 per cent of the stock it does not already own for up to 275p per share, a 60 per cent premium to yesterday's closing price.