ICI rises above crude crisis

ICI, the speciality chemicals maker, made an unexpected appearance on the FTSE 100 leaderboard yesterday after one of its two brokers put the stock back on its "buy" list.

With the oil price touching $42 a barrel following the terror attacks in Saudi Arabia at the weekend, traders had expected ICI to come under pressure. After all, petrochemicals account for about a third of the company's raw material costs.

However, the shares advanced 2.75p to 221.5p after Swiss investment bank UBS upgraded to "buy" from "neutral" and raised its price target to 260p from 240p.

Analyst Themis Themistocleous believes concerns about the impact of the strong oil price on profits at ICI have been overdone. He points out that ICI has hedged itself in a number of raw materials and is in a better position than a year ago to implement price rises.

Moreover, Mr Themistocleous reckons investors are failing to recognise the full value of ICI's paints division. Given its growing top line and low capital intensity, he believes it is worth about £2.13bn. Based on last night's closing price, that means the rest of ICI's businesses are valued at just £500m.

In the wider market, it was another quiet session with dealers blaming the half-term break for low trading volumes. Just over 2bn shares changed hands across the market as the FTSE 100 came to rest eight points lower at 4,422.7, with strength in the oil and mining sectors offset by weakness in telecom and media issues.

Elsewhere, the FTSE 250 index eased 27.1 points lower to 6,026.5 while the FTSE Small Cap index shed 7.3 points to 2,501.1.

In the bond market, gilts closed lower following data that showed increased manufacturing output in the US. The benchmark 10-year gilt closed at around 98.4, yielding 5.202%.

Mining stocks were the day's top performers as gold rallied towards $400 an ounce and the prices of other metals improved as the dollar remained weak. Gold producer Anglo-American rose 14p to £11.58, while Xstrata gained 8.5p to 698p and BHP Billiton moved up 5p to 464p.

Elsewhere, oil price strength saw BP climb 4.25p to 482p and BG improve 3.25p to 335.25p.

Cable & Wireless eased 2p to 121.5p after Lehman Brothers cut its forecasts by 8% ahead of today's full year figures.

Whitbread managed to buck the weak market, rising 3.5p to 803.5p on suggestions that the first thing its new chief executive, Alan Parker, will do is a sale and leaseback of the Marriott hotels business.

Mr Parker has already initiated a review of the company's businesses and UBS believes it could result in a radical reorganisation. Analyst Julian Easthope reckons a sale and leaseback of Marriott could raise £1.15bn, the proceeds of which could be returned to shareholders.

Carphone Warehouse, 7.75p stronger at 145.5p, was the FTSE 250's top performer as speculators piled in ahead of tomorrow's preliminary figures. The rumour in the Square Mile yesterday was that trading at TalkTalk, Carphone's fixed line telecoms business, has been booming.

But food producer Geest drifted 20p to 565p as investors moved to lock in profits made on Friday and analysts poured cold water on hopes of a bid from Bakkavor, the company's new 10.3% shareholder.

"The financial challenge of mounting a full-scale bid looks so great that we think one is unlikely to come for some time soon," ABN Amro said.

Elsewhere, dealers reported further interest in Canary Wharf after Brascan, the Canadian group that lost out in the bid battle for the Docklands property company, declared the purchase of 31.7m shares, taking its holding to 18.5%.

Combined with the stake of bidding partner Paul Reichmann it now controls 27.5% of the company. Reports at the weekend claimed a holding above 25% would allow Brascan to derail Morgan Stanley's takeover of the company. Apparently, Morgan Stanley will not be able to refinance Canary Wharf if another party owns more than a quarter of the company.

Elsewhere, building materials group SIG improved 7.25p to 367.25p after its non-executive chairman declared the purchase of 10,000 shares at 363.8p each but MFI fell 1p to 148.25p despite further talk of a 195p-a-share management buyout.

Among the small caps, Severfield Rowen, the steel structures engineering group, added 1.5p to 350p on rumours that its upcoming AGM trading statement will impress.

Shares in Ovoca Resources jumped 0.75p to 7.25 as Australian rival Dragon Mining announced it has increased its estimates for reserves at the Svartliden Gold Project in Sweden, which is adjacent to a site owned by Ovoca.

Dragon has increased its mining reserves by 12% and estimates of total "in pit mineral resources" by 21%, but possibly most interesting is that the company added that the mineral deposit it is exploring extends into the east - which would take it into Ovoca's territory. Ovoca is currently carrying out tests in the area and is expected to make some sort of progress report within the next few weeks.

NSB Retail Systems was marked 0.75p higher at 27p in response to the appointment of its non-executive director Stuart Rose as the chief executive of Marks & Spencer, up 6p to 365.5p.

Finally, watch out for Aim newcomer Vane Holdings this morning. Traders expect a solid debut for the mining company. The shares will open at 10p.