Market Report: Boost for Unilever, Whitbread and Dairy Crest

UBS, The Swiss investment bank, scored a hat-trick yesterday as three of its highest profile stock tips were sent soaring by the bank's new "buy" notes. The notes - on Unilever, the food and household products group, Whitbread, the leisure conglomerate, and Dairy Crest, the milk producer - generated high volumes of share trading for the bank.

UBS, The Swiss investment bank, scored a hat-trick yesterday as three of its highest profile stock tips were sent soaring by the bank's new "buy" notes. The notes - on Unilever, the food and household products group, Whitbread, the leisure conglomerate, and Dairy Crest, the milk producer - generated high volumes of share trading for the bank.

It was the call on Unilever which caused the biggest stir, and reversed the seemingly inexorable decline in the Unilever share price, which jumped 17.5p to 518.5p. In essence, the UBS note argued that investors should look through the disappointing trading of the past year - which ought to start improving from now anyway - to a return to sales growth of 3 per cent. The market has undervalued the cash flows of this vast business, it said, and it is time to start buying again.

Whitbread - which has long been on UBS's list of tips - was up 17.5p to 800p as the broker upped its calculation of the share's worth. It thinks the company could raise £1.65bn from asset sales over the next two years, much of which can be returned to shareholders. On the block, according to the UBS thesis, are the high street restaurants (including Pizza Hut and TGI Friday's) and the Britvic drinks business.

The mid-cap Dairy Crest was up 33.75p to 406.25p on another UBS "buy" recommendation and as directors exercised share options without selling the new shares - an expression of confidence in future prospects.

In all three stocks, trading volumes were double the average, and it was the same story across many parts of the market. Traders thought at least one big fund manager was trying to rebalance his portfolio before the long weekend and the end of the month, but not all the business got done in time. As a result, the closing auction saw some giant volumes and some peculiar share price moves likely to be immediately reversed on Tuesday. Royal & SunAlliance, which ended as the best FTSE 100 performer, up 3.5p at 81p, had been trading 2p lower all day; Rolls-Royce, up 7.75p at 225.75p, had been trading 4p lower until the last minute; and Alliance UniChem ended up 18.5p at 633p after trading flat.

Marks & Spencer gave Vodafone a run for its money in the table of most heavily traded shares. Vodafone, which is usually streets ahead of everyone else, turned over 339 million shares, closing its miserable week down another 1.25p at 128.25. Volume in M&S was 212 million and the stock jumped a further 14.5p to 359.5p on talk that Philip Green is not going to be alone in the bidding for the slipping giant of the high street.

As fevered discussion of bids and counterbids continued across the retail sector, the gossip was that GUS - the retail conglomerate which owns Argos and Homebase, and whose shares were 7p up to 813p yesterday - is considering a bid for Woolworths. Announcing a strategic review on Tuesday, John Peace, the GUS chief executive, handed out slide rules to his bankers and ordered that they be run over potential acquisition targets. Despite heavy trading, Woolworths shares were 0.25p lower at 44.5p as a countervailing bearish story also did the rounds: it's Entertainment UK music and video wholesale business is having to renegotiate its contract with the mighty Tesco, which contributes £10m a year to profits. The company could lose the contract entirely, of course, but the gossip yesterday was only that Woolies is having to settle for sharply reduced margins.

The quarterly rejig of the MSCI indices - the most widely followed of all the stock market indices - also generated a lot of trading. New entries to the UK index include Marconi, up 15.5p to 651.5p, Trinity Mirror, 4p better at 620p, and Punch Taverns, up 7p to 513p.

Northern Rock shares were a penny lower at 724p on fears that rising interest rates are squeezing margins. The mortgage bank's borrowing costs in are heading up faster than the base rate which determines its lending rates to customers.

Aveva, which sells design software to the planners of oil rigs and power stations, rose 6.5p to 519.5p on hopes for its recent acquisition, Tribon. And Clarkson, the shipping broker, fell 6.5p to 491p after the Investors Chronicle said "sell".

Peterhouse, the support services group, was up 2p to 194.5p as only 47 per cent of shareholders had accepted the all-share offer from Babcock International. Peterhouse's chairman, David Jackson, is waging a campaign against a deal the rest of the board are recommending. He says Peterhouse's value could leap when it is compensated for the loss of rail maintenance contracts. Babcock shares held at 112p as it extended the offer deadline.

NSB Retail Systems was 0.75p better at 26.25p on talk of contract wins. And Caffè Nero was a penny frothier at 96p as speculation of strong trading percolated through the market. The coffee shop chain is rumoured to have enjoyed a 6 per cent uplift in like-for-like sales since last quarter.

MARKET MOVERS

InterContinental Hotels 523.5p (up 13.5p, 2.7 per cent). Société Générale abandons "sell" recommendation amid City praise for this week's results.

Stagecoach Theatre Arts 92.5p (up 7.5p, 8.8 per cent). Magazine tip.

Martin International 23.5p (up 2p, 9.3 per cent). Clothing supplier to Marks & Spencer accepts £17m offer from Crystal International of Hong Kong.

Claims People 2.75p (up 0.25p, 10.0 per cent). Reassures that lost loss-adjusting business with Norwich Union can soon be replaced.

AGA Foodservice 244p (up 10.75p, 4.6 per cent). Spikes higher in last-minute trading.

Chloride 49p (up 3.25p, 7.1 per cent). Strong interims earlier this week.

Nestor Healthcare 134p (up 9.75p, 7.9 per cent). Hope that Stephen Booty, new acting chief executive, can get a grip on costs.

Minerva 240p (up 8p, 3.5 per cent). Property companies in favour after string of upward portfolio revaluations.

SSL International 318p (up 8p, 2.6 per cent). Hopes that Reckitt Benckiser could return with 400p bid.

Boots 658p (down 17.5p, 2.6 per cent). Debt-rating agencies and some equity analysts downgrade.

Lastminute.com 184.25p (down 2.75p, 1.5 per cent). Dresdner Kleinwort Wasserstein cautious on valuation grounds in new travel sector note.

Amlin 152.5p (down 4.5p, 2.9 per cent). Premium rates are starting to decline, Brit Insurance warned this week.

Glow Communications 0.81p (down 0.05p, 5.8 per cent). Poor results.

Lonmin 954p (down 18p, 1.9 per cent). Mining companies out of favour as commodities prices fall and brokers turn more cautious on profits.

Fairplace Consulting 55p (down 23.5p, 29.9 per cent). Outplacement retraining of redundant workers has slowed as economy picks up.

Bristol & London 55p (down 15p, 21.4 per cent). Profit warning.

Emap 761p (down 14.5p, 1.9 per cent). Competition in France.