Analysts at Barclays says company could sell some $2bn worth of assets by 2014, with cash returned to investors
On a busy and volatile day, one constant was a strong performance from InterContinental Hotels.
The owner of Holiday Inn and Crowne Plaza remained among the FTSE 100's biggest risers all day, finally closing 43p higher at £16.33. The impetus for the increase was news that Barclays had moved its recommendation from equal weight to overweight and its price target from £17.30 to £18.25. It said the group was expected to sell around $800m worth of hotel assets with the proceeds set to be returned to shareholders in 2013. On top of that, the bank said the group could announce the sale of further hotels in Paris and Hong Kong by 2014. This could be worth another $1.1bn. It expects an update on strategy alongside February's results.
Just ahead of Intercontinental was Xstrata, up 29.8p at 986.6p after the mining group's shareholders approved its long drawn out merger with Glencore, 5.15p higher at 331.75p, while booting out a controversial management incentive scheme at the same time.
Meanwhile Lonmin, where Xstrata has a near 25% stake, added 36.77p to 310.7p in the wake of its investors backing an $817m cash call on Monday.
After starting the day in the red, following Moody's cutting its Triple A rating on France, the FTSE 100 recovered to close 10.44 points higher at 5748.10. With EU finance ministers locked in talks over Greece, many analysts had expected investors to take some profits after Monday's rally, which appeared to be based on hopes that the US could overcome its fiscal cliff - the tax rises and spending cuts due to come into force next year. But news of a ceasefire in Gaza helped sentiment towards the close of the trading day.
Angus Campbell, head of market analysis at Capital Spreads, said:
The good news for the bulls is that the move by Moody's to downgrade their credit rating for France hasn't caused a knee-jerk reaction from investors and the equity markets have performed well considering one would normally expect a negative reaction to such an event. It indicates that this was already baked into the cake and when Fitch finally fall into line with their own downgrade we could see a similar muted response from the markets.
The rise in London also came despite an opening fall on Wall Street which was partly due to a disastrous statement from Hewlett-Packard. Not only was the computer and printer company's trading performance poor, but it revealed it was taking an $8.8bn write-down on its purchase of UK group Autonomy and made allegations of accounting improprieties against the business.
Elsewhere in technology chip designer Arm, up 3% on Monday on vague talk Intel could bid after the US group announced a change at the top, lost virtually all that gain, closing 20.5p lower at 726.5p as the euphoria faded.
International Airlines Group, the owner of British Airways and Iberia, climbed 4.2p to 167.6p after bumper results from Easyjet, up 39.5p at 692p.
British Land was steady at 515p as half year profits rose 3.8%. Mark Hughes at Panmure Gordon said:
You own British Land in the current environment because as we have said in the past, "it does what it says on the tin". Its stable portfolio and predictable income stream continue to deliver...outperformance and a predictable and attractive dividend yield (5.1%). We remain buyers with a target price of 570p.
Tullow Oil added 12p to £13.79 as it said it would buy a 40% interest in assets in Guinea owned by Texas group Hyperdynamics Corporation. Tullow is paying $27m and will carry a share of future expenses up to $100m.
Among the mid-caps, London Stock Exchange lost 1.5p to 985.5p as UBS cut its price target from 990p to 960p, saying the benefits of its diversification and cost control were already fully reflected in the share price.
Paragon, the buy-to-let mortgage lender, fell 9.3p to 240.7p despite record profits of £94.2m and a lower impairment charge. The shares have jumped sharply since May, so investors have used the full year figures as an excuse to take profits. But analyst James Hamilton at Numis issued a sell recommendation on the business.
Finally online market researcher BrainJuicer dropped nearly 30% to 256p after it warned full year profits were likely to be substantially below the £2.8m it reported in 2011. Canaccord Genuity said:
BrainJuicer's shares had been strong performers, up 21% so far this year and trading off a significant premium rating, reflecting an unblemished history of profits growth and significant out-performance of its peer group through continuous innovation. This is the first profits disappointment since its 2006 IPO, and the outcome could still be materially different to our projections.
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