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LONDON (Alliance News) - The FTSE 100 and FTSE 250 indices reached new record highs Friday, with housebuilder and estate agency stocks rising on upgrades from Jefferies.

However concerns emerged about UK's first quarter economic performance, as industrial and manufacturing production managed to post only marginal increases for February.

The FTSE 100 ended up 1.1% at 7,089.77, a record high close and just off the record intraday high of 7,095.36 also reached Friday. The FTSE 250 closed up 0.9% at 17,875.11, both a new record high close and intraday record. The AIM All-Share closed up 0.5% at 735.65.

The French CAC 40 closed up 0.6%, while the German DAX 30 closed up 1.7% at 12,374.73, itself a new all-time high.

At the close of European stock markets, Wall Street also was posting gains, with the DJIA and S&P 500 both up 0.5% and the Nasdaq Composite up 0.3%.

UK industrial production logged marginal growth in February as the expansion in manufacturing was largely offset by a decline in oil and gas output, according to the Office for National Statistics. Industrial output rose 0.1% on a monthly basis in February, offsetting January's 0.1% fall. This was the first rise in three months, but the rate was weaker than a 0.3% growth forecast by economists.

At the same time, manufacturing output advanced 0.4% reversing a 0.6% drop a month ago. The monthly increase came in line with expectations. On the other hand, oil and gas extraction slid 3.8%.

The pound fell to its lowest level since June 2010 against the dollar at USD1.4586.

IHS Global Insight Chief UK Economist Howard Archer said it now looks like industrial production was essentially only flat in the first quarter.

The first quarter gross domestic product data to be released on April 28, ahead of the UK general election may be very unwelcome news for the Conservatives and Liberal Democrats, given their hopes that many undecided voters will ultimately decide to reward them for the economy's improvement, Archer said.

However, Investec analyst Victoria Clarke believes the industrial production data does not mark the end of the UK economic recovery.

"What this all means, we suspect, is that whilst a softer Q1 GDP print than Q4's +0.6% looks to be firmly on the cards now, short of some very heavy lifting from the UK's dominant services sector in February and March, this isn't necessarily a story of a UK recovery coming off the tracks," the analyst said.

"Indeed, the underlying position of UK manufacturers looks respectable and survey data on the strength of UK services output suggests the sector's prospects have firmed as we have headed through the quarter," Clarke added.

The National Institute of Economic and Social Research's estimate of UK GDP growth over the three months to March came in at 0.6%, the same as its reading in February and January.

Among individual shares on the London Stock Exchange, housebuilders Barratt Developments, up 3.1%, and Taylor Wimpey, up 3.0%, were amongst the best performers in the FTSE 100 after Jefferies upgraded them to Hold from Underperform and to Buy from Hold, respectively.

The investment bank said the latest data point to a stronger pre-election housing market than it had anticipated.

It also upgraded estate agencies Countrywide, which closed up 5.8%, the best performer in the FTSE 250, and Zoopla Property Group, up 3.8%, as well as housebuilder Crest Nicholson, up 3.4%.

Oil stocks were also strong performers, as the price of oil rose. At the close of London stock markets, Brent oil traded at USD57.48 a barrel and West Texas Intermediate was USD51.26 a barrel.

In the FTSE 250, SOCO International ended as the second best performer, up 5.7%, while Tullow Oil added 3.9% and Premier Oil 3.1%. In the FTSE 100, BP ended up 1.0%.

Shire closed as the best performer in the FTSE 100, up 4.9%. The Irish drugmaker said late Thursday that its new drug application for lifitegrast, a treatment for dry eye disease in adults, has been granted a priority review designation by the US Food and Drug Administration. This designation means that the new drug application has a review target of eight months, compared to the standard twelve months. The FDA is expected to provide a decision on October 25.

Kingfisher closed down 0.9%, the biggest FTSE 100 loser, after Societe Generale cut the DIY retailer to Sell from Hold after its recent strong share price performance.

Reckitt Benckiser spin-off Indivior closed up 5.4%. Jefferies upgraded its rating on the pharmaceutical company, saying its proprietary survey of physicians has left it more bullish on Indivior's key product, abuse-deterrent opioid agonist Suboxone film.

OMG was one of the best performers in the AIM All-Share index, up 16%. The imaging technology company said it has struck a USD25 million deal to sell its 2d3 defence software business to Insitu Inc, a subsidiary of US aerospace company Boeing Co. OMG said it expects to make a USD16.4 million pretax profit on the sale and said it expects to pay a significant portion of the proceeds from the sale to shareholders via a special dividend.

Majestic Wine shares closed up 1.7%, after starting the day sharply lower. The wine retailer said it will acquire Naked Wines for up to GBP70 million in cash and shares, with founder and chief executive officer of Naked Wines Rowan Gormley to head up the enlarged group.

The market didn't initially like Majestic's trading update, nor plan to skip dividends to conserve cash for the acquisition, but warmed to the stock as the day went on. "The acquisition of Naked Wines...represents the sort of radical thinking we were hoping would come out of the strategic review and gives Majestic growth opportunities beyond the UK," said Investec analyst Kate Calvert. "Both businesses have much to gain from each other."

In the economic calendar Monday, the Bank of Japan will release the minutes from its latest monetary policy meeting at 0050 BST. Chinese trade balances are at 0300 BST, ahead of the French current account at 0745 BST.

The only scheduled corporate release of the day is half-year results from agriculture, food and engineering company Carr's Milling Industries.

Merlin Entertainment will begin trading in the FTSE 100 on Monday as a result of the Aviva-Friends Life Group merger. Clarkson will be enlisted into the FTSE 250 to take its place.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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