Market Report: Housebuilders shrug off US housing woes

The building and plumbing supply group Wolseley has been on a low-key spending spree in the last year, completing 42 acquisitions of which 25 have been in the US. Currency worries have added to the sellers' concerns in recent weeks but most analysts still believe the company will deliver profits in excess of £800m for the current year. Investors shrugged off any concerns that the Toll Brothers warning may hit Wolseley as the shares climbed 49p to close at 1,233p.

Many traders still believe Hanson will split off its US business, just as it once did with Imperial Tobacco and Millennium Chemicals. The shares had fallen more than 20 per cent from the high to open at 625p yesterday, but strong buying support saw them close at 658p, a 33p improvement.

Wm Morrison was also stronger, 3.5p better at 193p, as traders noted high volume amid speculation that a mystery Scandinavian investor was busy buying a substantial stake in the company. Traders took the stake-building stories seriously, although some dismissed chat that Baugur was behind the buying.

The telephone directories publisher Yell Group chose a good day to report bumper profits, as brokers and analysts warmed to a 35 per cent increase in pre-tax profits to £317.4m. Merrill Lynch reiterated its "buy" recommendation on the shares and upped its target price to 605p as the shares surged 41.5p to 505p.

What a difference a day makes. The sighs of relief were audible across the City as a wave of buying interest sent the FTSE 100 surging 146 points to close at 5678.7. The blue-chip index moved back into the black after Monday's sell-off, which saw London markets retreat into negative territory for the year to date. There was also an increase in activity on the derivatives markets, with traders noting increased hedging activity in both directions through index options as traders and fund managers sought to protect portfolios from further volatility.

Mining issues that have borne the brunt of last week's big sell-off bounced back in spectacular style, with Xstrata and Kazakhmys gaining more than 10 per cent. Xstrata, which is in the process of bidding for Canadian rival Falconbridge, closed 178p better at 1,942p, while the copper miner Kazakhmys reassured the market at its AGM and added 124.5p to 1,082.5p.

One blot on the London markets came with Marks & Spencer suffering a hefty bout of profit-taking after a set of forecast-busting results. The group announced a 35 per cent rise in pre-tax profits but good results had already been priced in to the shares. Early selling pressure saw the stock drop to 517.5p, a fall of 49.5p, before buyers lent the shares some support in the afternoon. The shares closed at 549p, a fall of 18p.

The FTSE 250 joined in the party, climbing 405.7 to 9,192.7, with only four second-line stocks ending in the red. There was no surprise that the main winners were in the commodity sector. A better day's trading on the metals markets encouraged buyers to step in, sending Lonmin 227p better to 2,441p, Randgold up 87p to 1,058p and Vedanta Resources 148p firmer at 1,290p. Mid-cap oil stocks were also well represented on the list of top gainers, with Soco International 175p firmer at 1,290p and Venture Production up 67p at 655p.

In the small caps, the minnow Scotty Group attracted good support from retail investors as rumours of another big contract win for the telecommunications and defence supplier did the rounds. Traders said the company is on the verge of announcing a £1.5m contract with the Dutch national telecommunications carrier KPN. Volume was good, with more than 3 million shares changing hands as the stock ticked 0.2p higher to 1.35p, a 17.4 per cent rise.

Bargain hunters were out in force among the smaller oil and commodity stocks after a week of heavy losses. Mediterranean Oil & Gas, up 21p to 193p, Sterling Energy, 3.25p better at 26.25p, and Cambrian Oil & Gas, a penny firmer at 4.25p, were the main beneficiaries.

Traders will be on the lookout for Debts.co.uk, due to make its debut on AIM today after a placing with institutions by the broker Seymour Pierce. Traders expect a strong first day of dealing from the company after the placing was seven times subscribed and priced at a 20 per cent discount to the debt solutions groups' quoted rivals.