Market Report: Petrofac shines as the FTSE 100 wobbles

Petrofac was the strongest of the blue chips as the FTSE 100 endured a volatile session last night.

The oilfield services group rose by 28p to 1,397p after JP Morgan Cazenove reiterated its positive stance, telling clients that despite making strong gains in recent months, Petrofac could continue to trade higher. "We still believe management has a lot of surprises to pull out of the hat this year, and those taking profits at current levels are focusing on valuation without considering potential earnings momentum," the broker said, repeating its "overweight" view.

JP Morgan was also keen on sector peers Amec, which rose by 17.5p to 973.5p, and Wood Group, which gained 9.2p to close at 420.9p after being upped to "overweight" from "neutral". "Despite good performance recently... Amec's valuation remains heavily discounted and anticipates little earnings recovery in 2011 or 2012," the broker said, noting that, at the same time, the company was well placed to exploit improving market fundamentals.

"Its expanding geographic and client footprint, increased exposure to capital projects and the relatively early cyclical nature of its engineering service[s] all bode well for earnings growth," the broker added, reiterating its "overweight" stance on Amec.

Overall, the markets were slightly lower after what proved to be a volatile session. Blue chips and mid-caps alike fell in early trading as investors digested some negative data out of the Eurozone, key among which was evidence of renewed contraction in the troubled Irish economy.

Afternoon news out of the US – official figures showed a rise in the number of Americans making fresh claims for unemployment insurance – added to the gloom, sending the FTSE 100 to a session low of 5,471.69. But a turnaround took root following news of rising sales of existing American homes in August, driving the benchmark back to 5,547.08, down 4.83 points, and the FTSE 250 to 10,426.02, down 22.3 points, by the close.

The gold miner Randgold Resources drew steam from rising macroeconomic fears, gaining 70p to 6,560p as investors sought a hedge against the threat of rising inflation and faltering economic growth. Both gold and silver, recently underpinned by signs that British and American central bankers may take fresh action to increase the money supply, flirted with new highs as investors continued to pour in. Silver came within cents of its highest level since 1980, while gold prices inched closer to the key $1,300 per ounce mark.

The wider mining sector was mixed. Though some remained stuck in the red, with Kazakhmys closing down 13p 1,428p, and Anglo American shedding 9.5p to 2,550.5p, a number of stocks bounced back as the market switched course. Xstrata, for instance, went from a session low of 1,168p, down 30.5p, to 1,209p, up 10.5p, by the end of the day.

Similar movements were evident in the banking sector. Earlier in the session, lenders fell back amid worries about the health of Irish banks. The mood was not helped by a local report that the country's finance minister, Brian Lenihan, had given the indication that holders of subordinated bonds in nationalised lender Anglo Irish Bank may not get all their money back.

Traders soon lost their appetite for risk, hitting the UK-listed banks. But, like the miners, the sector pared losses in the final hours of business. Royal Bank of Scotland went from a low of 46.78p, down 0.72p, to 47.96p, up 0.46p, by the close. HSBC, in focus amid reports that finance director Douglas Flint was likely to replace Stephen Green as chairman, was flat at 664p, while Lloyds fell by 0.76p to 75.09p.

Elsewhere, Aberdeen Asset Management was driven up to 152.4p, up 3.5p, on the back of chatter that Japan's Mitsubishi UFJ Financial was thinking about upping its stake in the funds group. In the wider sector, Ashmore and Bluebay Asset Management, though well behind Aberdeen, also fared well. Despite the weakness among the mid caps as a whole, Ashmore was 0.4p firmer at 323.6p, while Bluebay was broadly unchanged at 339.4p, down 3.4p.

On the downside, Cable & Wireless Worldwide, which began trading on the FTSE 250 at the beginning of this week, was 3 per cent or 2.3p worse off at 74p after Morgan Stanley reiterated its "underweight" view. Looking ahead to the company's half-yearly figures in November, the broker said "it is too early to expect any recovery after the July profit warning". The broker added: "The stock has bounced... from its August low and looks vulnerable," keeping its target price for the stock unchanged at 85p.

Asos, the online fashion retailer which fell after Morgan Stanley made negative noises on valuation on Wednesday, was 16p better off at 1,083p after Citigroup issued "buy" advice, telling clients that a sector-leading earnings growth outlook "merits a premium market multiple". In comments that are likely to aid speculative interest in the stock, Citi added: "Given ASOS's customer book... attractive customer demographic... and premium growth outlook, we believe it could be an attractive target."