Market Report: Enterprise Inns raises a toast to MPs

Enterprise Inns gained ground last night after a parliamentary committee stopped short of referring pub companies to the competition watchdog.

The Business, Innovation and Skills committee, following up on previously aired concerns about issues regarding the relationship between pub companies and their tenants, said the industry had until June next year to deliver "real reform". In a report published after the close on Thursday, the committee said that while a Competition Commission reference "may be necessary", there was a real possibility that the developments prompted by its May 2009 report "may, taken together, correct the serious imbalance of power in the commercial relationship between pub companies and lessees". If change is not forthcoming by next summer, the committee said "legislation to provide statutory reform should be recommended".

In response, analysts at Execution Noble revised their view on Enterprise Inns to "buy" from "hold", noting that, despite the committee's "aggressive stance and the feeling of a 'last-chance saloon', the threat of Competition Commission involvement is very much in the hands of the pubcos and is therefore significantly reduced".

The broker added: "This is not a crystal clear result for the pubcos, but ... it is a retrenchment from the May report which called for 'urgent investigation'." Enterprise rose to 109.9p, up more than 3 per cent, or 3.5p. Punch Taverns was also cheered by the developments, adding 1.65p to 77p last night.

Overall, the FTSE 100 swung to its highest level since September 2008, though a pullback in the final minutes of play kept it below the 5600-point mark. As a result, the benchmark, which is now up more than 10 per cent since the beginning of February, closed 72.6 points higher at 5599.76. The FTSE 250 was also strong, rallying by 109.43 points to 9774.72 as sentiment strengthened in response to better than expected US economic data.

The cheer was down to the latest employment report from the Labour Department, which revealed that American employers axed 36,000 non-farm jobs in February, well below market expectation of a drop of around 50,000. David Jones, chief market strategist at IG Index, said the data "really set the markets in motion" on Friday, adding: "Many felt that the announcement would have shown a gain in jobs had it not been for the unusually inclement weather."

The figures boosted recovery hopes, with the mining sector strengthening as traders eyed the prospect of improvement in the all-important US economy's demand for commodities. Xstrata, which was in focus after the Swiss commodities trader bought the group's Prodeco coal operations in Columbia, led the blue-chip mining plays, gaining more than 5 per cent, or 62.5p, to 1187p, while Fresnillo rose by more than 4 per cent, or 34p, to 846.5p. Anglo American was also higher, adding 74p to 2664.5p, while Kazakhmys, the target price for which was raised to 1550p from 1450p at RBC, rose by 45p to 1546p.

Financials were also cheered by the US data, with Standard Chartered gaining 60p to 1760.5p and the Royal Bank of Scotland rising to 39.99p, up 0.63p. Barclays was also strong, adding 2.5 per cent, or 8.3p, to 341.4p, as traders studied a report suggesting that star hedge fund manager Crispin Odey, concerned about the pressures on the sector in 2010, had reduced his exposure to banks. Elsewhere, the fund manager Schroders rose by 86p to 1396p after Credit Suisse, weighing in on the recently published annual results, raised its target price for the stock to 1500p from 1360p.

Also on the upside, Thomas Cook firmed up by 3p to 239.9p after Barclays Capital raised hopes ahead of the tour operator's investor day next week. "The group will show how it could achieve a target [margin] of more than 6 per cent," the broker said, reiterating its "overweight" view and adding: "If the 6 per cent can be achieved on current revenue, it would suggest EBIT [earnings before interest and tax] of £558m, and EPS [earnings per share] of 40.5p.... If the group can demonstrate this effectively next week, we believe the shares should react positively."

On the downside, GlaxoSmithKline (GSK) was under pressure, easing by 6.5p to 1238.5p after UBS, while repeating its "buy" view on what it termed "booming fundamentals", considered the litigation risk attached to Avandia, the diabetes drug which was the subject of a critical US senate report last week. "As US Avandia contributes 1 per cent to sales, our concerns are solely on personal injury lawsuits," the broker said. "The experts we polled suggest GSK's liability is in the range of $1bn to $6bn. We expect liability below the midpoint of this range."

Further afield, Tomkins was 7.2p stronger at 216p thanks to Nomura, which, factoring in the full-year results published earlier this week, raised its earnings estimates for the engineering group. "The stock looks attractive [on] valuation versus the rest of the sector, particularly because we see further upside potential in our earnings estimates," the broker said, switching its stance to "buy" from "neutral", with a revised 240p target price, compared to 180p previously.