Market Report: Mitchells climbs higher as confidence rises

The pubs company Mitchells & Butlers firmed up last night after an HSBC survey suggested that fears of a prolonged slump in consumer behaviour might have been overdone.

Respondents to the bank's survey of businesses suggested there had been a marked rise in demand recently, with 60 per cent of consumer-facing companies suggesting that activity was "running at levels better than or equal to 2008". Coupled with historical analysis, the results point to less risk than is currently reflected in leisure sector stocks. Moreover, while the sector has bounced from lows in absolute terms, valuations remain below historical averages on what are, in HSBC's view, conservative forecasts.

"Some caution is required, but a recovery now fits well with our analysis of historical consumer behaviour through the economic cycle," the bank's analysts said, pointing out that the travel and leisure industries outperformed the wider market from the end of the last two recessions by more than 90 per cent (1983-4) and more than 60 per cent (1992-3), respectively. "Crucially, this outperformance occurred while the late-cycle unemployment rate was still rising," HSBC added.

The optimism supported Mitchells, which rose by 5.2p to 245.4p as the broker initiated coverage with an "overweight" stance. HSBC also slapped "overweight" ratings on other travel and leisure stocks, including Whitbread, which closed up 7p at 1276p, and Marston's, up 0.6p at 93.4p.

In the wider consumer sector, Home Retail Group gained 8.1p to 306.7p on the back of the latest CBI distributive trades survey, which pointed to a pick-up in high-street sales. The stock was also supported by Barclays Capital, which initiated coverage with an "overweight" rating. Debenhams, also rated "overweight" by Barclays, was 2.75p stronger at 84.35p amid rumours that the US private equity investor Texas Pacific had sold all, or a large part, of its holding at 81.6p per share. The strength was attributed to speculation that shares had been bought by a single buyer; one rumour suggested interest from the Middle East.

Overall, the FTSE 100 edged up by 9.23 points to 5,200.97. The FTSE 250 fell back 44.82 points to 9,141.28 as traders looked to India, where the central bank took its first steps towards withdrawing stimulus measures by raising its statutory liquidity ratio, and to Norway, where monetary authorities are expected to raises interest rates for the first time in more than a year.

There was also caution ahead of Thursday's US gross domestic product report, with traders awaiting more clarity on the fortunes of the world's largest economy before turning more bullish on equities.

The banking sector remained under pressure, with the shake-up of the Dutch lender ING weighing on its UK peers Lloyds Banking Group, which fell 5.5p to 83.84p, and Royal Bank of Scotland, down 3.615p at 40.805p. Investors sold out amid worries that European regulators, who are thought to have pressured ING, might impose tougher than expected sanctions in return for the state aid received by the two banks, possibly leading to more in the way of divestments than currently anticipated by the markets.

Vedanta Resources also fell, closing down 118p at 2215p after a report that its Sesa Goa unit was being investigated by India's serious fraud office. Sesa said that, as of the 27 October, it had "not received any notification or communication" from the Indian authorities about the alleged matters.

On the upside, the pharmaceuticals group GlaxoSmithKline rose after the US Food and Drug Administration granted accelerated approval for Arzerra, a leukaemia treatment developed by GSK and its Danish biotech partner Genmab. In response, Evolution Securities reiterated its "buy" stance, saying it preferred GSK to sector peer AstraZeneca because GSK offered more defensive sales and earnings prospects. At the close, GSK, which in the past has been rumoured to be eyeing Genmab, ended 26.5p stronger at 1256.5p. Astra was up 54.5p at 2830p,

Elsewhere, shares in the directories group Yell endured a rocky ride. They suffered a bruising double-digit decline in the morning after the company once again extended the deadline for refinancing talks with its lenders. But the shares rapidly pared their losses, moving into positive territory amid rumours of an agreement. At the close, with no official confirmation to the Stock Exchange, Yell was 0.5p ahead at 52.5p. Further afield, the sugar and sweeteners group Tate & Lyle was 5.1p lighter at 450p after Deutsche Bank switched its stance from "buy" to "hold", albeit with a target price revised upwards from 450p to 475p. The broker said that while its forecast changes reflected the recovery in the sugar premium and in some of Tatye & Lyle's cyclical divisions, the downgrade was prompted by the limited shareholder return implied by its new target price.

Looking ahead to Tate's interim results next month, Deutsche said that Javed Ahmed, the new chief executive, and former head of North America and Europe at consumer goods giant Reckitt Benckiser, could bring new thinking to the company which could, in turn, "change the way the stock is looked at and valued".