Afternoon:
9°c
The banking rally is far from over. That's the conclusion of Icap, which put a spark under the sector today by saying that bank stocks across the globe could double again in value.
As the economy recovers and the number of bad loans fall, the inter-dealer broker reckons earnings will shoot up.
Although banking shares have rocketed since March as investors revert to riskier punts, Icap's analysts say a drop in bad-loss provisioning should be sufficient to push banking shares up throughout 2010.
This was a further boost for Lloyds Banking Group, which had already won a fan club amid optimism on asset sales.
The black horse bank is said to be in talks with Resolution, the Clive Cowdery vehicle that is sniffing round for acquisitions, to sell pensions group Clerical Medical.
The move could give Lloyds's coffers a £4 billion boost. Lloyds inherited Clerical Medical from its ill-fated merger with HBOS. Shares in the bank raced up 5.36p to 106.9p, as around 115 million changed hands.
They are edging closer to the average price of 120p that the Government paid for its stake in the lender last year.
While the taxpayer is still looking at overall losses from the banking bailout, it was back in profit on Lloyds's rival Royal Bank of Scotland today.
RBS shares topped the Footsie risers, 2.9p higher at 51.4p - above the average 50.5p the Government paid.
Gains from the banking stocks, as well as the heavyweight miners, helped shares in London to extend the winning streak into a fifth day.
The FTSE 100 briefly went through the 4900 barrier, before settling up 35.73 points at 4886.62. The benchmark index is at its highest level since October last year.
New York followed London's lead, with the Dow Jones climbing 51.54 points to 9557.50.
Sentiment on Wall Street was boosted by figures showing US economic activity improved again in July.
Miners were boosted by higher metal prices and optimism about a recovery in Chinese demand.
Rio Tinto advanced 101p to 2497½p, Kazakhmys surged 52½p to 979p and Eurasian Natural Resources was 41p better at 891½p.
Results from WPP on Wednesday are likely to be something the company wouldn't want to advertise.
The City's boffins are tipping Sir Martin Sorrell's group to report an 8% drop in like-for-like sales in the quarter as its clients cut back on ad spending, causing a 7% decline for the first six months of the year altogether.
But the advertising giant still has a fan in Deutsche Bank, which today advised clients to snap up the stock.
It has upped its rating from hold to buy and raised its target price from 465p to 610p, sending WPP's shares surging 22p to 526½p.
Deutsche reckons its cost-cutting efforts are paying off, and that the future looks brighter. Although WPP will take a hefty hit from redundancy costs in these results, analysts say its leaner structure should boost margins.
They are also hopeful after several large advertisers said that they intend to increase ad spending in coming months.
But Jefferies International advises dumping the shares.
The broker warns that WPP will lag behind other companies in seeing any recovery in earnings, with advertising traditionally among the last sectors to bounce back after a recession.
Petrofac's investors booked profits after the shares hit a record high in early trading. They were toasting a strong set of first-half figures from the oil services group, with profits rising 16%.
Chief executive Ayman Asfari expects the rest of the year to be even better, forecasting first-half earnings growth of at least 20% because of a string of new contract wins.
Petrofac won orders worth $5.8 billion (£3.5billion), up from $1.7 billion for the same time last year.
Goldman Sachs - already keen on the shares - reiterated its buy rating.
The City big-hitter has upped its price target from 920p to 1180p thanks to the strength of its order book and its cash-making abilities. Its shares have gained 42% in the last three months but lost 9p to 904.3p today.
Petrofac received more good news as the cost of crude hit a 10-month high, above $74 a barrel, on expectations that an economic bounceback will increase demand for energy.
Among mid-caps, Yellow Pages publisher Yell Group was the biggest winner, surging 2¾p to 41p on rumours of a debt refinancing.
The debt-laden group shored up its finances at the end of May, and said then that it was looking to refinance the group comprehensively.
