Market report: Thursday close

THEY have been gazing intently into crystal balls at Credit Suisse First Boston and decided European stock markets will outperform the US again this year.

CSFB has a year-end target of 5100 for the FTSE 100, in the middle of the range of City forecasts. It also predicts that blue-chips will outperform second-liners this time, with the main index now at a 20% discount to the FTSE 250.

It is focusing on retail banks and telecoms in which it has an overweight rating, while giving a wide berth to metals and mining, chemicals and technology hardware.

On its shopping list are Vodafone, even at 142p, Royal Bank of Scotland, 1p lower at 1752p, drugs companies - including GlaxoSmithKline, 5p lower at 1234p - and attractive oil stocks such as BP, 5p higher at 509p.

Elsewhere, investors set about recouping some of yesterday's steep losses, underpinned by an opening rally on Wall Street this afternoon. London's FTSE 100 index rose 18.3 points at 4,824.3 in thin trade.

British Airways was boosted 11½p to 242½p by the December passenger numbers showing a rise of investment bank says the reporting season has kicked off 'worse than expected' with disappointing performances already recorded by Woolworths, unchanged on 37¼p, and Next, up 5p at 1632p, and the possibility of even gloomier news from the likes of Marks & Spencer, ¾p up at 338¾p, which is due to report next Wednesday, Boots, 13p better at 647p, and Dixons, ¾p dearer at 151¾p.

Bookseller Ottakar's continued the gloomy theme today by warning profits for the year would fail to match City expectations.

Pre-tax profits are now expected to be not less than £7m, against £6m the year before. Broker Evolution Beeson Gregory had been forecasting £8.5m and has downgraded from add to reduce. The shares slumped 47p to 285p.

Yesterday's late surge in fashion retailer French Connection, famous for its fcuk advertising campaign, showed signs of running out of steam today, the price dipping ¼p to 260¼p. Traders claim the rally was sparked by a number of stories doing the rounds, including talk of a potential bid by Icelandic outfit Baugur.

It could also be that one bear, who sold short in the belief the company would soon be issuing another profits warning, had struggled to cover his position.

International news agency and financial information systems supplier Reuters rallied 2½p to 366¾p. Cazenove has cut its earnings forecast for this year by 14% ahead of next week's trading update. It has also trimmed its 2006 estimate by 3%, blaming the impact of Reuters' Telerate acquisition. Still, the broker continues to rate the shares in-line.

Stoddard was suspended at 0.87p after asking its bankers to appoint a receiver. The floor coverings supplier has failed to secure further funding to keep the business going.

Computers group Sage fell ¾p to 197¼p after US investment bank Merrill Lynch downgraded from buy to neutral, having seen the price hit its target of 203p.

Building materials supplier Ennstone slid ¼p to 38p after a line of 23.59m shares went through at 36p as part of a delayed trade.