City hits new high as profit updates inspire investors

The FTSE 100 Index pushed higher after strong corporate news yesterday and better than expected economic data from the US.

Blue-chips Legal & General and Cairn Energy led the London market to a new 21-month high close to the 5700 mark at one stage, although the top flight eventually closed 29.09 points up at 5673.63.

Wall Street's Dow Jones Industrial Average also made modest early advances after US home sales fell by less than expected in February, with the Dow Jones Industrial Average 0.4 per cent ahead.

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The National Association of Realtors said sales fell to an annual rate of 5.02 million units in February. The decline was less than forecast, but it highlighted the fragility of a housing recovery.

"Month-over-month sales were marginally better," said Tom Schrader, managing director, US equity trading at Stifel Nicolaus Capital Markets in Baltimore. "It says sales flat-lined."

At the same time, home builder KB Home posted a wider-than-expected quarterly loss, pushing its stock down 3.5 per cent to $16.83. The Dow Jones US home construction index fell 0.7 per cent.

Sterling saw a choppy day on the currency markets however as a sharper than expected fall in UK inflation sent it plunging back below 1.50 against the dollar at one stage.

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February's slide in UK inflation to 3 per cent from 3.5 per cent

prompted concerns that interest rates could stay at record lows for longer, although the pound eventually clawed back much of its losses. Sterling was flat at 1.11 against the euro.

The leading Footsie riser was oil and gas explorer Cairn Energy, which rose 8 per cent, or 301/8p to 4087/8p, after flagging higher output from its Indian assets.

Meanwhile, insurer Legal & General followed close behind after it

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posted an 87 per cent rise in operating profits and predicted a

recovery in its core pensions and savings markets.

Shares in the group rose 33/4p to 851/8p, as L&G also hiked its dividend. Fellow insurer Admiral added 42p to 1327p.

British Airways firmed 61/2p to 2471/2p, after the company said Unite's three-day strike had cost it an estimated 21m, but left its

expectations for the year broadly unchanged.

But retailers featured prominently on the Footsie fallers' board following a gloomy profit warning from Carpetright in the FTSE 250.

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Carpetright slumped 11 per cent, or 101p to 825p, in the second tier as the firm's sales failed to bounce back in February and March after the snow at the start of the year.

This knocked Argos and Homebase owner Home Retail Group in the top flight, shedding 67/8p to 275p, while B&Q firm Kingfisher – the

Footsie's biggest faller – dropped 6p to 227p.

Another Footsie casualty yesterday was defence giant BAE Systems, which shed 85/8p to 3801/4p as the firm suffered a broker downgrade following Monday's loss of a 4bn deal for armoured vehicles to a US rival.

Back in the FTSE 250, services firm VT Group rose nearly 5 per cent, or 311/2p to close at 7211/2p, after its board recommended a takeover approach from rival Babcock International.

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The offer, which values VT at 1.3bn, comes after Babcock made several unsuccessful bids for the company.

Babcock shares were up 5 per cent, or 271/2p to 560p.

The biggest Footsie risers were Cairn Energy, Legal & General, Eurasian Natural Resources ahead 44p to 1194p and Petrofac which closed the day 42p higher at 1228p.

The biggest Footsie fallers were Kingfisher, Home Retail, BAE Systems and Unilever which finished the day 31p off at 1909p.

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