The permanent scrum outside Primark’s Oxford Street store is encouraging investors to take a punt on Associated British Foods, which beat a falling market on expectations that its results next week will impress.

Shares in the foods group, which gets about a third of sales from Primark, were up 17p to 922p on talk that trading at the retailer was running ahead of forecasts. UBS, the analysts, repeating “buy” advice, argued that if AB Foods can avoid cutting forecasts for its core business, investors will be keener to price in its long-term growth prospects from bio-fuels investment, Primark’s international expansion and cost-cutting at the group’s sugar operations.

Traders were also optimistic about Reckitt Benckiser, which will deliver first-quarter results the day before. Shares were up 34p to £26.74 on hopes that the numbers will come with improved 2007 targets.

The maker of Dettol, Nuro-fen and Lemsip has targeted at least 6 per cent sales growth for 2007, a projection that some analysts view as too cautious. However, sterling’s strength could be a significant drag on revenue growth this time.

Inflation concerns held back the wider market, with the FTSE 100 index closing down 48.4 at 6,449.4. Expectations of higher interest rates weighed on property stocks, and sterling’s strength held back dollar-earners such as Rolls-Royce, which fell 9¾p to 487½p.

Bearish comments from Goldman Sachs hit Scottish & Southern Energy, off 31p at £15.43. The bank said that the utility’s shares were overvalued against peers and would need another bid in the sector to sustain their speculative premium.

Punch Taverns eased 12p to £12.77 on its first day in the FTSE 100. That was despite hopes that it would announce a disposal of 870 pubs, 11 per cent of its estate, to improve the average pub’s quality ahead of England’s smoking ban. Punch is expected to raise about £330 million from the disposals.

The disposal plan comes amid renewed talk that Punch could be targeted by financial funds looking to unlock property value. However, analysts doubt that the company would want to consider strategic options until interim results, due on May 1, are out of the way.

Mitchells & Butlers rose ½p to 795p as Numis Securities said that a merger with Whitbread, down 8p to £18.99, would be “a natural end game” for the two.

Short covering was the theme elsewhere among mid-cap stocks, with EMI and DS Smith confounding bears who had been betting on profit warnings. EMI rose 10½p to 225¾p after a trading update showed no deterioration in trading from its February profit warning. Decisions to suspend its dividend and look to borrow against its music publishing catalogue were no surprise, although the latter decision raised questions over whether it created a poison pill against Warner Music bidding again.

DS Smith, the packaging maker, rallied 16¼p to 231¾p after delivering a positive trading statement. The shares had dropped 10 per cent this week after Goldman Sachs cut its rating to “sell”, based on rising materials prices.

WS Atkinswas the day’s top performer with a 137p rise to £11.40½ after the engineering consultancy said that it would beat profit forecasts, despite continued problems with its Metronet London Underground upgrade consortium.

Optimism before an investor meeting next week lifted Carphone Warehouse 10½p to 290½p. Its warning on broadband costs this month could mean that the bad news is out of the way and the retailer may concentrate on its American expansion plan and broadband rollout, dealers said. According to research by Man Financial, Carphone’s senior management stand to receive a bonus options payout if they can get the share price above 312p.

New York: The Dow Jones industrial average closed above 12,800 for the first time, signaling Wall Street’s recovery from its steep decline in February as investors rewarded companies with strong earnings. The day was not a standout for the overall market, however, with technology stocks dull. The Dow went as high as 12,813.51 before closing at 12,803.80, up 30.80, breaking its February 20 record.

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