CARNIVAL shrugged off weakness in the US dollar as the FTSE 100 cruise operator showed the first signs of rebounding from its position as the worst blue-chip performer so far this year.

The owner of the Queen Mary 2 has seen its shares fall 16.4 per cent since January, meaning it has underperformed the wider stock market by 26 per cent in the year to date. Apart from earnings downgrades relating to weaker than expected trading, Carnival has been hit by a rise in oil prices towards $75 a barrel, an 8 per cent depreciation in the US dollar against sterling and the after-effects of a fire on the Star Princess in March.

While intra-day currency moves proved unhelpful yesterday — the dollar hit a 12-month low of $1.865 during the morning session — a dip in oil prices beneath $70 a barrel proved supportive.

So, too, did a repeated “buy” recommendation from Dresdner Kleinwort Wasserstein. The German broker has cut its earnings forecasts by 4 per cent, but suggests that the shares offer a 22 per cent potential gain. Its analysis of pricing in the cruise market gives it confidence that consensus revenue forecasts are achieveable, helped by an expansion of its European brands and strong US consumer confidence. Further, Dresdner believes a move to lower commissions driven by the growth of online bookings could save costs equal to 6 per cent of 2005 earnings. Carnival put on 48p to £28.06, against a 24.6-point retreat in the FTSE 100 to 6,067.1.

Xstrata, up 111p at £23.65, enjoyed the best large-cap performance as a C$17.8 billion (£8.5 billion) bid from Teck Cominco for Inco, the London-listed miner’s rival in the bid battle for Falconbridge, appeared to leave Xstrata, which holds 19.9 per cent, as the sole predator.

British Land advanced 23p to £13.32 as Cazenove raised its current-year net asset value forecasts — by 3.4 per cent to £14.78, and that for next year by 6.2 per cent to £16.92 — before full-year figures from the property developer on May 23. The broker has turned more positive on the company’s development and investment portfolios in Central London, where it says office markets are starting to perform strongly. Pre-results buying also buoyed Sage Group, up 6½p to 265¼p, which files first-half figures today, and Royal & SunAlliance, 1¾p dearer at 142p, which files first-quarter numbers on Thursday.

A raised price target of 225p — against 210p previously — from Deutsche Bank before tomorrow’s trading update from DSG International sent the PC World and Currys owner up 3½p to 188½p. The German broker thinks the statement should reveal signs of a TV boom which it expects to last for three years

ICI put on 5p at 395¾p after Merrill Lynch raised its price target to 450p, from 400p, citing last week’s “excellent” first-quarter results.

Unilever shed 3p to 562½p as Morgan Stanley scrapped its “overweight” recommendation — which it has held for 15 months — in favour of a more cautious “equal weight” rating.

• NEW YORK: Stocks were little changed as investors awaited the US Federal Reserve’s decision on interest rates. The Dow Jones industrial average closed up 6.80 points at 11,584.54.

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