Rentokil Initial was in demand on Thursday after the ratcatcher received a boost from its house broker on the eve of its third-quarter results.

Shares rallied 3¼p to 112p after Merrill Lynch added the services group to its “most preferred list”, saying that the figures out today should prompt full-year upgrades and reinforce the turnaround potential of the business.

It said that Rentokil was a leveraged self-help turnaround where new management had already delivered on their initial priorities of improving customer service and cashflow and cutting costs at City Link, its parcel delivery unit. Moreover, it said that they still have significant scope to improve returns and, ultimately, the option of realising value through a break-up.

In a review of the services sector, Merrill also added Wolseley, the plumbing and heating group, down 18p to £12.69, and Michael Page, the recruiter, up 5½p to 345p, to its preferred list. However, Capita, the outsourcer, up 3½p to 762p, and Bunzl, the distributor, up 2p to 646½p, join the broker’s least preferred list.

The FTSE 100 advanced 17.75 points to 5,125.64, bouncing back from early session lows after the Bank of England said that it would extend its quantitative easing programme and keep interest rates at 0.5 per cent.

Vodafone made ground, up 1½p to 137½p, after reports that India could cut the annual licence fee paid by large operators by up to a third.

Retailers continued to be buoyed by upbeat updates earlier in the week, with Next rising 44p to £19.56, Kingfisher gaining 4p to 235½p and Tesco up 9¾p to 418¾p.

SABMiller rose 24p to £16.40 after Evolution said that it was the most likely buyer of Femsa’s beer operations and that the balance of news from the company for the next year or so would be positive despite nearly half of its markets remaining tough.

Cable & Wireless was the biggest faller, dropping 9p to 139p, after the telecoms group cut full-year earnings guidance because of a poor performance in the Caribbean, which overshadowed confirmation that it was pressing ahead with a demerger.

British Airways also lost ground, falling 5½p to 186¼p, after Fitch, the ratings agency, said that it expects the operating environment for the airline industry to remain tough in the short to medium term and that all large European network carriers would probably experience negative operating margins in 2009. BA is expected to report a first-half loss today.

Vedanta Resources eased 48p to £22.42 after underwhelming first-half results. Evolution fell 1¾p to 151p after Banco Espirito Santo de Investimento sold its near-10 per cent stake in the stockbroker. A number of City institutions are thought to have bought the shares.

William Hill traded 2½p lower at 173¾p as the bookie’s presentations to the bond markets failed to capture the imagination. It is looking to raise as much as £250 million, partly to pay down debt.

BBA Aviation rose 7p to 156¼p after Panmure Gordon upgraded its rating on the services group to “buy”, saying that a recovery had set in.

New York: A drop in unemployment claims and an upbeat forecast from Cisco Systems helped shares to surge on Wall Street. The Dow Jones industrial average closed at 10,005.96 points, up 203.82.

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