Market Report: Kingfisher flies high on bullish broker update

The home-improvement retailer Kingfisher has been one of the worst-performing blue-chips stocks during the past two years, losing more than 16 per cent since January 2005 against a FTSE 100 that has risen 28 per cent.

However, Kingfisher, up 8.75p to 259.75p was one bright spot in an otherwise dull market, thanks to a bullish research note from the French broker Société Générale. The investment bank told clients the groupis "the best hidden-value play in the European retail sector".

Some shareholders can be forgiven for thinking that one of the reasons the company's value is well hidden is because analysts are so down on the company, but its trading record over the past couple of years has been poor. SocGén thinks it may have turned a corner and expects a more bullish update with next week's fourth-quarter trading statement. The broker reversed its recommendation on the group's shares from "sell" to "buy" and upped its target to 342p from 236p.

Reed Elsevier followed yesterday's strong run with a bout of profit taking, sending its shares 8.5p lower to 636p by the close. Reed plans to sell its educational publishing arm, and there is speculation that the Irish entrepreneur Barry O'Callaghan, the man behind the software group Riverdeep, is preparing a bid. Analysts believe that Reed's educational arm could fetch up to £2bn in an auction, with private-equity bidders also certain to enter the fray.

The mining sector was hit hard by the Chinese central bank's reserve requirement decision as traders peculated that the move could dampen demand for metals. Anglo American dipped 32p to 2,538p before Rio Tinto, up more than 12 per cent since the first week of January, fell 35p to 2,799p by the close.

Weaker commodity stocks, with losses in metals and oil producers, sent the blue-chip index marginally lower, but there was little enthusiasm either way from traders, many of whom preferred to stay on the sidelines before next week's rush of full-year results. The FTSE 100 closed 13.8 worse, giving back almost exactly what it made up on Thursday, to close at 6419.5.

The industrial ceramics maker Morgan Crucible found good buying support in advance of next week's results, with Credit Suisse and Deutsche Bank upgrading its shares. The Swiss broker lifted its recommendation to "outperform" and set a 315p price target, and told clients that if the company hits its 13 per cent margin target its shares could be worth up to 360p. Morgan Crucible, which reports full-year numbers on Tuesday, climbed 13p to close at 296p.

Talk that Aberdeen Asset Management may be keen to do a deal with struggling F&C Asset Management helped the latter to surge 8.25p to 176p, although most traders are sceptical that a bid is in the pipeline. Meanwhile, the Dutch broker ABN Amro initiated coverage of mid-cap fund managers, recommending a "hold" and a 158p target for F&C. It was more bullish on Aberdeen, recommending a "buy" and setting a 230p target, although the shares ticked just 0.75p better to close at 209.5p.

The waste management group Biffa has been a strong performer since demerging out of Severn Trent in October at 260p per share. The broker Cazenove thinks there is more upside left in the price, and upgraded its shares to "outperform" with a 360p price target, telling clients the company is set to benefit from pre-treatment of landfill waste. Biffa shares closed up 4.25p at 347.25p.

Small-cap traders are excited about prospects for the AIM-listed Ruralec, despite closing just half a penny better at 53p yesterday. The company is transforming itself into a South America-focused power generator, operating four power plants in Argentina and Bolivia.

Positive news flow on increased capacity is expected soon on new developments in the region. The company also has close ties to another emerging market power developer, IPSA, which operates in South Africa and whose shares have rocketed in recent weeks. Traders are hoping for the same from Ruralec.

The disaster of the day among small caps was Inter Link Foods, which shocked investors with a profits warning. The broker Shore Capital slashed its recommendation on its shares to "sell", telling clients "we are very concerned over the prospects of InterLink". The pie maker's shares tanked to close 96p worse at 241.5p, an all-time low.

Hexagon Human Capital came in for a bout of profit taking after its successful initial public offering this week. Its shares listed at 168p on Thursday, but closed 11p worse at 179.5p as punters cashed in on the strong debut. Investors also took some winnings off the table at Haike Chemical Group, another newcomer, on the back of its 90 per cent jump in its first week. Its shares fell 8.5p to 143.5p.