Market Report: Smith & Nephew gets a spring back in its step

Second-quarter results from the replacement hip and knee maker Smith & Nephew indicated just what a tough first half the group has had.

A group reorganisation resulted in pressure on some contracts but the outlook for the second half of the year appears to be much brighter. However, fears that the company was about to issue a second profits warning of the year were unfounded and the shares enjoyed a relief rally, closing at the top of the blue-chip leaderboard with a 30.75p improvement to 462.75p.

Despite the positive move the stock made, analysts were still reluctant to issue "buy" recommendations on S&N. Morgan Stanley said: "Given the concerns going into the numbers, we believe this is an important first step in restoring investor confidence." Even so, the US broker remains neutral on the stock, a view echoed by Cazenove and Credit Suisse.

Strength in mining and oil stocks helped the FTSE 100 power ahead, 52.4 better at 5,929.5, offsetting a poor day for pharmaceuticals. A combination of cautious broker comment on second-quarter numbers and a bout of profit-taking saw AstraZeneca fall 111p to 3,209p and GlaxoSmithKline shed 21.5p to 1,485p.

Another stock to benefit from news that was better than feared was Kingfisher, up 8.25p at 244.75p. Even though sales declined by 2.4 per cent on a like-for-like basis, it was the best performance from operator of the home improvement chain B&Q in 18 months. The Swiss broker UBS reiterated its "buy" stance on the shares with a price target of 280p. Its rival Travis Perkins also benefited from the better than expected results from Kingfisher, closing 48p better at 1,458p.

The accounting software group Sage was well bid on rumours that the long-awaited management buyout of Misys is on the verge of being finalised. A consortium of private equity groups is the favourite to win Misys, and the likely valuation of £1.3bn should have positive repercussions for Sage as the shares closed 13p better at 230p, while Misys declined 3p to 242.5p.

Inmarsat, the satellite group, fell 6.25p to 330p before reporting maiden full-year results next Friday, as traders took some profits off the table. The stock has gained just under 18 per cent in the last 12 months and according to some brokers the shares are on a very rich valuation.

Merrill Lynch initiated coverage of Soco International on Wednesday, giving the mid-cap exploration and production group a "buy" rating and a price target of 1,500p. The bullish note sent the shares to the top of the FTSE 250 leaderboard, up 81p at 1,375p.

It looks like traders are taking bid rumours at Amec seriously, with the private equity investor Carlyle thought to be considering an offer for the engineering and construction group. Market-makers said a large seller was still being cleared from the market yesterday but expect the stock to move significantly better on the bid speculation once the overhang is cleared. Carlyle declined to comment on the rumours as shares in Amec closed 5p better at 295.25p, with almost 9 million shares changing hands.

In the smaller caps, the specialist commodities publishing group Metal Bulletin had another offer from Euromoney Institutional Investor, as widely expected after the group rejected a 255p offer on 21 June. Traders said the first offer had no chance of succeeding but this offer, pitched 56 per cent higher, should tempt major shareholders into accepting. Metal Bulletin insists its merger with Wilmington Group is still on, but with Metal Bulletin rising 24.5p to 395.5p it looks like Euromoney may have this battle won. Wilmington climbed 4p to 184p.

Among the star performers in the small-cap sector was A Cohen, an AIM-listed cash shell, after it confirmed the handheld computer and smart phone manufacturer Crimson Tide will reverse into it. Crimson Tide has raised £3m through a placing organised by WH Ireland at 1.5p. The new shares will start trading on Monday, and new investors have already made 25 per cent on their money as A Cohen closed at 2p, 0.5p better.

Buyers piled into Antrim Energy, the dual AIM and Toronto-listed oil and gas explorer. Strong buying support in Canada and rumours of a large buy order sent the shares up 17.5p to 142.5p.

Directors of Sarantel took advantage of a profits warning last week to add to their holdings in the mobile device antenna manufacturer. Directors, including the chairman Geoff Shingles and chief executive David Wither, bought just over 455,000 shares, sending the price 3p firmer to 12.5p.