Market Report: Imagination shines as analysts eye iPad gains

Imagination technologies zoomed ahead last night as traders bought in on hopes of gains, as Apple lures consumers with the latest version of its iPad.

The technology giant began selling the newest instalment of its tablet computer in the US last week – and shortly afterwards, techie types were ripping off the screen to find out what made the much-anticipated machine tick. Soon, the internet was abuzz with confirmation that, alongside components from STM and Dialog, the device was also powered by chips made by Imagination and FTSE 100-listed peer ARM.

RBS analysts said that, while the presence of these components was no surprise, it expected the chip manufacturers to reap bigger rewards from iPad 2 than they did from the first Apple tablet.

"This reflects the higher complexity and performance of the iPad 2 as well as the uniqueness of their technologies," RBS said, helping drive Imagination to 460.1p, up 23.9p, and ARM to 525.5p, up 2.5p.

Moreover, analysis from the tech journal AnandTech showed that the Imagination chip used in the new device was delivering an "impressive" performance, RBS said, adding that the test results should reassure investors about the competitiveness of the FTSE 250-listed firm's offering.

Overall, japan continued to dominate market sentiment as traders factored in the impact of last week's devastating earthquake and tsunami, while also watching out for further developments at the damaged Fukushima Daiichi nuclear plant.

The jitters depressed the FTSE 100 index by about 1 per cent or 53.43 points to 5,775.24. The mid-cap FTSE 250 index was slightly better, easing by around half a per cent or 59.8 points to 11,3489.66

The limited appetite for risk meant that only a handful of blue-chips managed to close with any meaningful gains. Burberry, the luxury fashion retailer, was the hardest hit, shedding more than 4 per cent or 51p to close at 1,123p on concerns about its exposure to Japan, the world's third largest market for luxury goods.

The decline came despite RBS analysts arguing that the "correlation between Japanese GDP [gross domestic product] and luxury goods share price performance started to break down in 2005-6 as sales exposure started to shift away from core traditional markets" in Europe and Japan to other Asian countries such as China, Singapore and the Middle East.

The energy services group Amec was also caught in the market sell-off, losing 37p to 1,115p as Evolution Securities warned of the potential fallout from the problems at Japan's quake-hit nuclear facilities.

The broker said the troubles at nuclear plants in Japan could lead to "renewed battles against 'new nuclear' in the UK, despite the minor detail that the UK is not anywhere near an active plate boundary and therefore not an earthquake-risk zone".

Evolution explained: "We would expect the 'normal' media hysteria over nuclear to result in further delays in the UK programme to build new nuclear plants, which would not be good news for AMEC, which sees nuclear as a key plank in its 'power and process' division strategy."

Like the big losers of the day, the bigger winners on the FTSE 100 were mostly higher on factors relating to Japan. Chief among them was Aggreko, which specialises in setting up temporary power plants around the world.

The stock rose by more than 8 per cent or 116p to 1,523p after the company signalled its readiness to help out in meeting the island nation's power needs. "We have already signalled our willingness to the relevant authorities and will deploy our equipment as rapidly as possible if needed," a company spokesman said.

The oil and gas group BG was also ahead, swelling by 54p to 1,514p on the possibility of it stepping in to supply Japan with liquefied natural gas (LNG). "BG has high capacity in LNG," Seymour Pierce analyst Brendan D'Souza said. "One fallout from the Japan tsunami seems to be that some nuclear facilities may not be able to produce power. That will have to be switched over to other sources, such as gas and coal."

Southern cross Healthcare was among the standout losers of last night's session, sliding by more than 60 per cent or 10.18p to 5.57p after the care homes operator announced the termination of bid talks.

The group, which also reported a "decline in its trading outlook" in recent weeks, said that while it had received a "number of highly preliminary proposals" over the past couple of months, none were likely to result in a meaningful offer.

In response, Panmure Gordon abandoned its "hold" view, putting its recommendation and its target price under review until it receives further clarification regarding the extent of the deterioration in trading.