Market Report: Wolseley support builds on news from the US

A glimmer of hope for the troubled US housing market lifted Wolseley as the FTSE 100 struggled to find direction last night. The plumbing and heating products group claimed pole position on the benchmark index, adding more than 6 per cent, or 96p, to 1,591p on the back of new US mortgage data.

The headline figures were uninspiring – the Mortgage Bankers Association said total mortgage applications had slipped for a fourth consecutive week, led by a decline in refinancing – but evidence that demand for loans to buy homes had risen for the first time in three weeks offered some relief over the prospects for the world's largest economy. That in turn sparked interest in Wolseley, which has extensive operations on the other side of the Atlantic. News that its finance chief, John Martin, had picked up more than 10,000 shares also boosted sentiment.

Overall, the markets were quiet, with the FTSE 100 easing by 9.17 points to 5,569.27 and the FTSE 250 edging up by 10.12 points to 10,562.53 amid thin volumes. BP was the second strongest blue chip of the day, adding 15.85p to 421p as the company announced the departure of Andy Inglis, the head of its exploration division, and unveiled a shake-up of its safety operations.

Rolls-Royce secured third place. The engineering group was 20.5p stronger at 612p following a push from Morgan Stanley, whose analysts upped the stock to "overweight", labelling it their top pick in the aerospace and defence sector. The broker said RR's civil aerospace margins, down from a peak of 14 per cent in 2007 to 8.6 per cent over the first half of this year, were on track to recover to 13.5 per cent by 2013, opening the door to higher earnings.

The accountancy software specialist Sage was less fortunate. The stock fell prey to a round of profit taking, shedding 3.9p to 276.1p as recent rumours of bid interest began to fade. Panmure Gordon also weighed in, recommending that, instead of banking on takeover talk, investors pay closer attention to the positive read-across from IRIS Software; the results of the UK's second largest private software business offered "proof that there is a broad-based recovery afoot".

Elsewhere, Tullow Oil was the subject of some bid talk last night. Market rumours pointed to takeover interest from China, and Sinopec was named as a possible bidder for the oil prospector, but there was little detail in the chatter. As it was, the speculation failed to gain much traction, and Tullow, which went ex-dividend yesterday, closed flat at 1,283p.

On the upside, Standard Life rose 1.8p to 232.4p after JP Morgan Cazenove switched its recommendation to "neutral" from "underweight". The broker said that although the stock was not cheap enough to warrant a buy, there was potential in the group's moves to prepare for the structural changes being ushered in with the FSA's Retail Distribution Review. "Should Standard Life be successful in its strategic positioning, then 2012 should be the year in which we begin to discount the benefits," the broker added, raising its target price to 272p.

The pharmaceuticals giant AstraZeneca slid by 62.5p to 3,237.5p after RBS analysts struck a note of caution on the valuation. The broker said that while the stock had been driven up by a series of positive updates over the summer, newsflow was likely to be more muted for the rest of the year. With that in mind, and with Astra's shares close to the broker's 3,500p target, RBS lowered the stock to "hold" from "buy", signalling that it was "time for a breather".

Its sector peer GlaxoSmithKline was also held back, losing 14p to 1,251p despite some positive comment from Collins Stewart. Returning from a meeting with GSK's chief executive, Andrew Witty, the broker said the company was set to outperform over the coming year.

"GSK has a very solid outlook, with a strategy (not always shared by peers) built absolutely around shareholder value creation," the broker argued, repeating its "buy" view.

Further afield, Bluebay Asset Management was also 1.7p behind at 344.3p despite a push from Credit Suisse, whose analysts reiterated their "outperform" view following a meeting with its chief executive, Hugh Willis. The broker also stuck with its positive stance on sector peer Henderson, which lost 1.2p to 125p despite the broker saying that the current valuation reflected "too great a discount for any perceived risk".

The maintenance firm Mitie was 7p worse off at 192p after Collins Stewart lowered the stock to "hold" and UBS scaled back its target to 240p from 290p.

UBS stuck with its "buy" view, however, saying that while the market needed to see evidence that revenues had bottomed out before focusing on Mitie's strengths, the valuation offered scope for upside gains.

The office rental group Regus drew attention after some late takeover talk. The chatter raised the possibility of a bid of as much 140p per share, which, if accepted, would represent a significant premium to last night's closing price of 83.5p, up 5.85p. The rumours remained vague, though, and, despite triggering a late rally in the shares, did not throw up any names.