Competition

The UK-Analyst Friday Competition is back! This week's prize is a copy of Poor Economics - a radical rethinking of the way to fight global poverty - by Abhijit V. Banerjee and Esther Duflo (RRP$26.99). For your chance to win send us your funniest caption for the picture below. Email your entry to richard.gill@t1ps.com by 9am on Monday morning. The winner will be announced in Monday's report.

The Markets

The London markets finished the week in style, as better than expected UK services data and strong employment figures from the US pushed shares markedly higher. The UK services Purchasing Managers' Index rose from 54 to 56 in January, suggesting the sector grew at its fastest rate in ten months. As services account for 70% of UK GDP, the data is sure to reduce growing fears that the economy is heading for a double-dip recession. Across the pond, new farm payrolls once against smashed expectations as the US created a further 243,000 jobs in January, 100,000 more than anticipated, leaving analysts red-faced. In other news, Sir Philip Hampton, chairman of 82% taxpayer owned Royal Bank of Scotland slammed bankers' pay, saying it had been too high for too long. Despite this, he defended Stephen Hester's 1 million pound bonus, arguing the bank needed to pay competitive salaries to retain the "best people".

At the London close the Dow Jones was up by 144.64 points at 12,850.05 and the Nasdaq was up by 30.54 points at 2,526.37.

In London the FTSE 100 gained 105.00 points to 5,901.07; the FTSE 250 finished 148.64 points ahead at 11,235.15; the FTSE All-Share climbed by 51.91 points to 3,047.42; and the FTSE AIM Index rose by 5.19 points to 780.43.

Broker Notes

Recently formed N+1 Brewin (formerly Brewin Dolphin) raised its recommendation for Vitec (VTC) from "hold" to "buy" with an increased target price of 670p, from 560p. The broker said that the video equipment developer's shares have lagged behind the recent market rally, which it believes is unfair given the improved economic climate. N+1 Brewin approves of the group's exposure to the US, which accounts for around 50% of sales, and believes that the Olympics will boost sales of its products. Vitec shares grew 13p to 575p.

Shore Capital reiterated its "buy" rating for Serco (SRP), impressed by the services firm's order book, which stood at 16.7 billion pounds as at 10th August 2011. The broker also expects to see synergies from the June 2011 acquisition of outsourcing group Intelenet for 395 million pounds, including improving underlying profit margins. Shore Capital forecasts earnings per share of 42.7p for 2012, putting the shares on a prospective multiple of 12.3 times. The shares rose 10p to 524p.

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Daniel Stewart maintained its "buy" stance on Playtech (PTEC), with a 462p target price. The broker believes that the gaming software developer's size will allow it to thrive as global gambling markets regulate, while smaller companies may fall by the wayside. Additionally, Daniel Stewart noted the group's ongoing consolidation programme, and with 137 million euros of cash at the end of the year ended 31st December 2011, the broker believes the company is well positioned to make further acquisitions. Shares in Playtech inched up by 1.75p to 310.5p.

Panmure Gordon kept its "buy" recommendation for Spirent Communications (SPT) with a target price of 156p. The telecoms tester is expected to see increased demand for its services as customers develop their 4G networks, said the broker. With a large number of competing technology companies, Panmure Gordon believes it is difficult to pick a winner, but with Spirent servicing a wide range of clients and types of technology the broker stated that its success is not dependent on any one provider. The shares edge up by 1p to 131.2p.

Blue-Chips

Shares in Admiral (ADM) jumped by 76p to 1,038p after it reported that it had extended its car reinsurance partnerships with Hannover Re, Mapfre Re, New Re and Swiss Re in the UK until 2014, with unchanged terms of agreement. These deals come on top of its existing agreement with Munich Re, which covers 40% of the UK business and lasts until 2016. However, Shore Capital remained more concerned over losses from bodily injury cover, and with the shares trading on an earning multiple of around 12 times, the broker reiterated its "sell" recommendation.

Telecommunications group BT (BT.A) announced a 5% fall in sales over the three months ended 31st December to 4.8 billion pounds, but adjusted pre-tax profits rose 18% to 0.63 billion pounds beating research house Jefferies' forecast by 6.3%. The company enjoyed a number of contract wins, 50% coming from Asia Pacific and Latin America and continued its super-fast broadband roll out across the UK, brining it within reach of 7 million homes and businesses. The shares advanced by 8.1p to 214p.

Tullow Oil (TLW) signed two product sharing agreements with the Government of Uganda, covering the EA-1 and Kanywataba licences at the Lake Albert Rift Basin. The deal will allow the oil and gas company to farm out the development to China National Offshore Oil Corporation and Total (TTA). It is believed that the basin could contain between 6 and 10 billion barrels of oil. Shares in Tullow swelled 22p to 1,462p.

Mid-Caps

Electrocomponents (ECM) reported year-on-year revenue growth of 4% for the four months ended 31st January 2012, with international growth of 5% compensating for a subdued UK performance of just 1%. The group attributed its international improvement to its scale allowing it to provide a wider range of products than its smaller competitors. However, the electronics distributor saw subdued trading conditions in January, with overall growth slowing to just 1%, with a flat UK performance. The shares slipped 1.9p to 232.2p.

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Banking software developer Misys (MSY) confirmed that it is in discussions with Swiss peer Temenos for a possible merger. The news follows the breakdown of talks with Fidelity National Information Services in August 2011. Merchant Securities believes that the talks are an act of desperation by the company as it struggles to cope with poor market conditions. The broker reiterated its "sell" recommendation, with a 220p target price. Shares in Misys climbed by 4p to 329.5p.

Investec (INVP) said that despite seeing continued net inflows, like-for-like assets under management declined 5.9% over the nine months ended 31st December to 83.7 billion pounds. However the specialist banking group's acquisition of financial services company Evolution in September resulted in a total increase of 1.9% to 90.6 billion pounds. The firm also noted that operating income rose 4.6%, including a 16.3% rise in net fees and commissions. The shares crept up by 0.8p to 402.9p.

Small Caps, AIM and PLUS

Vane Minerals (VANE) shares climbed 0.1p to 1.175p on news it has encountered a mineralised copper, molybdenum and zinc porphyry system at the McGhee Peak project in New Mexico, US. Drilling identified two targets located approximately one mile apart, intercepting grades of up to 600ppm copper and 200ppm zinc. Further drilling is now to take place at the prospect to decipher the commercial viability of establishing a mine. Moving on to precious metals, gold exploration firm Condor Resources (CNR) uncovered further high grade gold intercepts on the India-California structure at the La India project in Nicaragua. The gold structure reportedly stretches the 25 metre distance between the India and California veins, providing gold grades of up to 6.95g/t at a depth of just four metres. The findings add credibility to the potential for open pit mining. Condor Resources shares rose 0.25p to 6.75p.

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Recruitment and outsourcing firm Network Group Holdings (NGH) announced it had agreed on the terms of a recommended cash offer from NGH Topco, of 26p per share. The bid comes at premium of 40.5% to the pre-offer closing price and values the company at approximately 19.6 million pounds. NGH Topco is a private company created for the sole purpose of acquiring shares in Network and temporary staff provider Pertemps. Network shares surged 7p to 25.5p.

Environmental Support Services group Silverdell (SID) announced it has been awarded a number of contracts across the UK with a combined value of 3.6 million pounds. The firm will carry out hazardous waste management consultancy with a two separate companies in the north of England, and had also signed a 5-year 450,000 pound per annum contract with a housing sector client in the south-west to carry out asbestos remediation. Silverdell shares gained 0.75p to close at 11.875p.

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Shares in GAME Group (GMG) surged 1.325p to 6.625p as the board confirmed the company was likely to meet its covenant tests for the period to 31st January 2012. The group also said it had concluded discussions with its lending syndicate and agreed revised terms for its facilities. Broker Singer Capital has doubled its forecasted loss for the year ended January to 30 million pounds following the firm's Christmas trading statement, and now has a 1p target price on the shares.

Finally, the board of PLUS Markets Group (PMK) is to commence a formal sale process of the company, after coming to the conclusion that finding a partner company would allow it to better achieve its objective to become an internationally recognised investment exchange. Management believe the firm is well positioned strategically to exploit the opportunities presented by recent changes in the regulatory and technological environment. The shares fell 0.15p to 0.975p, valuing the company at just 3.79 million pounds.

The Week Ahead

Next week we look forward to full year results from aerospace and automobile company Rolls-Royce (RR.), oil and gas giant BP (BP.) and pharmaceutical developer GlaxoSmithKline (GSK), which reported mixed data over its long drug Relovair in January. Miner Rio Tinto (RIO) will also issue its final results and it will be looking to deliver a strong performance while it is threatened to be overtaken as the UK's largest mining company as merger talks between Xstrata (XTA) and Glencore International (GLEN) continue. The discussions are reminiscent of the BHP Billiton (BLT) merger of 2001 and coincidentally the natural resource company will be issuing its interim results next week.

We will also hear half year results from after school activity group Stagecoach Theatre Arts (STA), drinks maker Diageo (DGE) and precious metal explorer Aquarius Platinum (AQP), which suffered a disappointing second quarter.

There will also be interim management statements from online gambling group 888 Holdings (888), fashion retailer Supergroup (SGP) and debt ridden package holiday group Thomas Cook (TCG).