Market Report: Blue chips end torrid year on positive note

The FTSE 100 ended its final session of 2008 with a gain of almost 1 per cent, climbing 41.49 points to 4,434.17 yesterday.

Volumes dwindled, with just 242 million shares changing hands during the reduced session before the new year. The benchmark has lost almost 31 per cent of its value over the past 12 months, the biggest loss since it was first constituted in the 1980s

The FTSE 250, on the other hand, ended in the red yesterday, losing 90.31 points to 6,360.85.

Weaker commodities prices – oil slipped back below $39 per barrel as demand concerns overshadowed the unrest in Gaza – prompted a round of profit-taking in the mining sector.

Vedanta Resources, down 7.21 per cent, or 47.5p, at 611.5p, was the hardest hit among the blue chips.

Eurasian Natural Resources Corporation, which had spent the previous two sessions at the top end of the FTSE 100 leader board, was lodged near the bottom of the index, nursing a loss of 2.73 per cent, or 9.25p, at 330p.

Randgold Resources – the best performing stock on the index this year – also succumbed as investors moved to bank recent gains. It closed down 1.47 per cent, or 44p, at 2,948p.

Rio Tinto bucked the trend, however, gaining 2.9 per cent, or 42p, to 1,490p. The miner rebounded as concern about its interests in Guinea subsided.

Elsewhere, FirstGroup swung to the top of the index, gaining 4.96 per cent, or 20.5p, to 434p, as transport groups celebrated the oil price weakness.

Bargain hunters pushed up a number of stocks, including Standard Chartered, which supplemented earlier gains to climb to 875p, up 4.92 per cent or 41p. Investors also moved in to capitalise on recent losses in 3i, the private equity group that closed at 272p, up 3.03 per cent or 8p, and Royal Bank of Scotland, which was up 2.49 per cent, or 1.2p, at 49.4p.

On the second tier, Aberdeen Asset Management surged to 119.5p, up 14.63 per cent, or 15.25p, after the company said it will acquire Credit Suisse's fund management arm in an all-share deal value at around £250m.

The deal, which will boost Aber-deen's funds under management to around £150bn, was welcomed by the market, with one analyst calling it "transformational".

"This is set to give the group inc-reased scale in its current markets and will be earnings-enhancing as soon as it is completed," the analyst added.

Imperial Energy continued to charge ahead, gaining 3.49 per cent, or 42p, to 1,247p, after India's ONGC Videsh confirmed receipt of valid acceptances representing almost 97 per cent of Imperial shareholders in support of its 1,250p-per-share offer.

In the housing sector, Bovis Homes overcame a downward trend, gaining 5.19 per cent, or 19.75p, to 400.25p after Cazenove switched its stance on the stock to "in-line" from "underperform", citing the recent successful arrangement of new banking facilities.

"The new facilities take away any going concern risk that may have been raised by the auditors when signing the 2008 financial accounts," the broker said. "With the new facilities now maturing in 2011, the management can focus on running the business for the long term rather than the short term. In our view, this is positive for both the stock and [the] sector, especially for those companies that are currently renegotiating their existing banking facilities and covenants."

Cazenove added that if the banks involved in the Bovis deal, including HSBC, RBS and Barclays, still had housebuilders in their highest risk categories, the agreement may not have come about this year.

"They would have waited to finalise [the deal] until they had evidence of how well or badly the early spring selling season had started."

Among smaller companies, Oilexco slumped to 20p, down 60 per cent or 30p, after the company said that its Oilexco North Sea subsidiary intends to file for administration "as soon as reasonably possible but likely to be early as next week". It added: "Oilexco Incor-porated is considering its options in light of this development but at this time remains solvent and committed to the strategic review that was pre-viously announced [on 17 December]."

Blue Oar was down 5.26 per cent, or 0.5p, at 9p after it said that Evolve Capital, whose hostile offer for the group was declared unconditional this week, had invited proposals for a management buyout of the company's stockbroking arm.

Besides stockbroking, Blue Oar incorporates Blue Oar Asset Management, the Astaire international trading business, the Rowan Darlington wealth management division and Inteq, the Australian investment boutique.

In other news, Gavin Casey, who took over as Blue Oar's chairman just before Evolve mounted its offer, has resigned with immediate effect. Mr Casey, a former London Stock Exchange chairman, does not plan to accept the bid and is planning to sell his shares in the open market.