Market report: Monday close

SHARES recovered from a slow start today to close at their highest level in more than a year.

Further signs of an improvement in manufacturing and industrial output provided the inducement to lure buyers back into the market, though brokers described trading as thin.

The FTSE 100 rose 34.9 points to 4292.1, its highest since late August 2002. The blue-chip index was supported by opening gains in New York, where bullish broker notes drew in the buyers.

Reuters took a big hit, falling 11p to 245 1/2p. Word is the financial information supplier has been in for a meeting with broker UBS. Talk is said to have centred on the possible loss of a big client in the City.

BG Group edged ahead 4p to 270p after broker Credit Suisse First Boston raised its recommendation from neutral to outperform and lifted its target price from 263p to 305p. CSFB is impressed with the exploration group's strong 'best-in-class' cash flow. It told clients today: 'With exploration and production as the main contributor to profit, we believe cash flow and returns are underpinned by a very high-quality business.'

GlaxoSmithKline ended unchanged at 1275p after a US advisory panel urged regulators to reject an experimental drug for smoker's cough. The experts voted seven to three on Friday against Food and Drug Administration approval for GSK's Ariflo, for treating the serious lung condition known as chronic obstructive pulmonary disease, because of doubts over its effectiveness. Goldman Sachs and ABN Amro are both positive about GSK. Rival AstraZeneca hardened 11p to 2661p despite Merrill Lynch setting a price target of 3150p.

HSBC traded 7p better at 825 1/2p after UBS raised its rating from neutral to buy and lifted its target price from 800p to 950p.

Merrill Lynch has thrown its weight behind mobile phones giant Vodafone, 2 1/2p better at 121 1/2p. Merrill has added the shares to its Europe 1 list after a poor showing of late by the price. It says the valuation is compelling. Morgan Stanley has repeated its equal-weight recommendation on Vodafone and raised its target price from 134p to 142p. Morgan says the new chief executive's focus on growth is the right strategy for driving long-term shareholder value.

Merrill Lynch also says it is a seller of Dixons, down 1 1/2p at 140p, while discount airline easyJet slipped 5 3/4p to 253p despite UBS setting a target of 350p. Lambert Howarth shed 5p to 257 1/2p as the market digested news that directors have been selling shares. Garry Hogarth and Richard Brainin have sold 850,000 shares each at 250p (£4.25m) reducing their holdings to 2.83m, or 11.5% of the company.

A negligible increase in total net assets in the six months to June left Candover Investments down 36 1/2p at 1227 1/2p.

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