Market report: Outsourcers sparkling as contracts materialise at last

Capita, Serco, Logica (it's not obligatory to end the name of your Government support-services firm with a vowel, but clearly it helps) have been talking up their so-called outsourcing bonanza since well before May's General Election. They were gearing up to rake in millions of pounds of contracts taking in everything from social housing, schools and roads to recycling and back office as early as 2008.

Then along came the hung Parliament and they admitted that their chance to profit at UK Plc's expense had been delayed. Then delayed a bit more, then a bit more. Now finally it really is happening. IT oursourcer Capgemini announced it had signed a "memorandum of understanding" with the Government to cut IT costs - hot on the heels of a similar deal signed by rival Atos Origin.

That helped send Capita - still best-known as the one that lost the Congestion Charge contract back in 2007 - to the top of the FTSE 100, up 21.5p to 770.5p. Further down in the Footsie250, rival outsourcer Logica gained 5.6p to 124.7p, and Serco, running the Boris Bike scheme, rose 2.5p to 616p.

Elsewhere, the market movers were whingeing about overall volumes remaining light. One trader lamented that he "might as well have stayed abroad on the sunbed" since nothing was happening at his desk. It was, he admitted, a "surprise" for mid-way through September. "By now I'd expect to see a lot more movement, things are taking a while to go going."

The FTSE 100 ticked a little higher, up 3.42 points to 5568.65.

Although this morning's worse-than-expected inflation figures failed to move the market much, expectations of resultant belt-tightening gave some consumer stocks a kicking. Tui Travel, owner of Thomson and First Choice holidays, led the losers' board, down 2.6% or 5.9p to 220p. The logic ran that Britons facing a tougher economic recovery are unlikely to spend thousands fleeing abroad. Bank of America/Merrill Lynch slashed its recommendation on Tui from buy to neutral, saying: "The company is still concentrating on fixing specific issues in loss-making regions."

Fears that cautious Brits would keep their purses firmly in their pocket also led to traders checking out of a range of retail shares. Fashion chain Next's boss Simon Wolfson has already warned of tough times in the High Street as tax rises and spending cuts hit demand. Today's economic figures lent some weight to his argument, sending Next down 34p to 2049p.

The decline was helped by Société Gé*érale, which cut its rating from hold to sell and said Next's performance was "uninspiring".

Marks and Spencer fell too, down 0.8p to 363.6p, despite analysts from Investec reporting positive signs from a walk around its Marble Arch branch yesterday. Investec wrote of the outing: "While footfall was hardly heavy, a trend to trading up and better-balanced autumn ranges should allow M&S to [avoid] suffering a like-for-like sales downturn. We expect the shares to continue to rally ahead of Marc Bolland's strategic review despite worsening sentiment towards the retail sector."

Only Debenhams bucked the trend, outside the top flight in the Footsie 250, where today's decent trading figures pushed it up 2% or 1.35p to 66.32p.

Market-makers were also absorbing the gloomy housing market data from the Royal Institute of Chartered Surveyors - which reported the sharpest fall in house prices since May last year - and decided fewer Britons would be shopping for new shelves and wall paints at the DIY chains. Home Retail Group, owner of Homebase and Argos, was off 3p to 212.7p, and B&Q owner Kingfisher sank 2.5p to 210.8p.

But at the other end of the home-improvement spectrum, signs were much brighter. Shares in posh wallpaper and soft furnishings group Colefax and Fowler rose 3p to 178p after it reported its fabric sales rose 10% in America and 20% in the UK in the four months to September. Its banker customers aren't expecting to have to rein in their spending, whatever happens to the rest of Britain.