As the UK market drifted ever closer to a record high - albeit in thin trading - BT was one company in the spotlight.
The telecoms group added 0.9p to 406.1p after analysts at Nomura issued a buy note and said its shares could reach 500p. Nomura's James Britton said there were several catalysts ahead that should improve its growth prospects:
Easing regulation: This first step is now secure after Ofcom finalised its fixed access charge controls. The market is aware of an improving regulatory climate, but analyst estimates do not factor in the cumulative benefit of reducing regulatory headwinds (£300m by 2017).
Upselling mobile to enterprise: BT's launch is imminent. We believe the opportunity is substantial given BT's 50% share in small and medium sized enterprises fixed, its ability to discount mobile voice/messaging on data networks, and the precedent set by Meteor in Ireland. 15% market share should add £100m to cash flow, on our estimates. Heading for 10m broadband subscribers: The strength of BT's recent broadband performance, backed by its dominance of fibre, may well be sustainable if the alternative operators do not promote fibre more actively. A 10m broadband base should drive additional cash flow of £100m. A convincing mobile offer for the UK consumer: BT will not have a femtocell [low power cellular base station] capability on launch later this year, so we expect the proposition to be price-led, pushing family plans and pooled data. Penetrating 30% of BT homes could generate cash flow of £300m in the long term. A reasonable Premier League outcome: We believe the market can digest higher-than- expected costs if there is a commensurate improvement in the quality of BT's acquired rights and certainty on the outcome removes the number-one risk factor putting investors off BT. There will be some bumps on BT's journey – not least when significant employee options vest in August 2014 – but we think investors should latch on to such buying opportunities. We reiterate our conviction buy rating.
Overall the FTSE 100 finished 16.79 points higher at 6875, just 55 points off its all time closing high reached on 30 December 1999, before the dotcom bubble burst.
Following last week's positive reaction to the European Central Bank's rate cut and US non-farm payroll data, there was some well-received trade figures from China, showing a 7% year on year rise in exports in May, as well as an upward revision to Japan's first quarter GDP.
With the Chinese news lifting commodity companies, Antofagasta added 8.5p to 781p while Anglo American was up 6.5p at 1471.5p and Randgold Resources rose 24p to £43.80.
On Randgold Barclays said:
We hosted a day of investor meetings with Randgold chief financial officer Graham Shuttleworth last week. In our view, Randgold offers a combination of rising production driven by higher grades, declining capex, rising net cash and as a result strong dividend upside potential. The company should be in a position to fund its next 250,000-300,000 ounce per annum mine development and pay a double-digit medium term dividend yield based on our $1300 an ounce gold forecast. This compares extremely favourably to the UK precious metals peer group, while trading at a 47% PE discount to Fresnillo. Reiterate overweight.
Housebuilders were also in demand, boosted by hopes of further home construction to ease the housing shortage. Barratt Developments added 9.3p to 375.9p while Persimmon put on 15p to £13.11.
With the World Cup approaching, the expectation of strong sales of replica kits lifted Sports Direct International - also trying to get a new share scheme past shareholders - by 12p to 625p and JD Sports Fashion by 66p to £17.10.
But Lloyds Banking Group lost 1.33p to 78.82p after it priced the flotation of its TSB business at between 220p and 290p a share, below book value.
A late faller was Babcock International, down 24p to £12.26 after it said it would not win any of the second tranche of defence estates contracts, having spoken to the Defence Infrastructure Organisation. This follows a legal challenge delaying the announcement of the outcome of the contracts, the company said.
Aggreko fell 8p to £16.79 as Panmure Gordon moved its rating on the temporary power supply business from buy to hold, following a visit last week to the company's operations in the Americas. Analyst Paul Jones said:
This visit was positive in overall terms, with more optimistic news on local economies than we previously imagined and a sense that the business is setting the foundations for further growth with training programmes and efficiency drives which should enable it to drive deeper into existing sectors and also expand further into Latin America to take advantage of structural power shortages. However, until these potential prospects and opportunities translate to profits, we feel the shares look high enough after a recent run.
Finally, Aim-listed Leni Gas and Oil was lifted 22% to 3.69p by positive drilling news from a development well on the Goudron field in Trinidad.
