Market report: Wednesday close

THE market strove to extend its recent encouraging run today, but the Footsie struggled to consolidate its position above 4600, and fell back below that mark to close at 16.1 points down at 4592.3.

Shares are now trading at their highest since 5 July, 2002, with the Footsie having risen almost 40% from an intraday low of 3287 in March last year.

The bulls argue that, having come this far, there is scope for further improvement. But the bears point to rising interest rates here and in the US as likely to deflect fresh money away from the market, while the third-quarter recovery in earnings growth many analysts had expected appears some way off.

The joy was not being shared at Britain's biggest hedge fund operator Man Group, which tumbled 66p to 1261p, making it the biggest faller among the top 100. US broker Morgan Stanley is unimpressed with prospects and has downgraded from overweight to underweight.

It has also cut its earnings forecast for next year by 5% to 96p a share and by 7% to 106p for 2006. It warns the group's recent poor performance will hit profits and that it could struggle in the longer term.

Shell's much-talked-about strategy update failed to impress the City and left it down 14 1/4p at 418p. ICI dipped 4p to 209 1/2p after broker CSFB gave it an underperform rating and warned clients that earnings growth and the lowly yield of less than 3% provided few attractions.

Tesco added 1 1/2p to 283 1/2p on further reflection of yesterday's bumper profits news. Broker UBS has repeated its buy rating and lifted its 12-month target from 315p to 330p. ABN Amro has upgraded from sell to hold. J Sainsbury dipped 4 1/4p to 268 1/4p on reports that profits were again under pressure.

Investment bank JP Morgan still likes Marks & Spencer, 3/4p down at 340 3/4p, and rates the shares overweight despite new boss Stuart Rose admitting profits growth sucks. It says that, assuming a strike price of 360p in the retailer's tender offer for its own shares, there is still something to go for.

Security printer De La Rue fell 1/2p to 315 1/2p after reporting first-half trading had been in line with the board's expectations. That means the outcome will be 'significantly' ahead of last year.

The group, which prints everything from banknotes to travellers' cheques, last year won a major contract to supply the Iraq regime with a new currency.

Computacenter slipped 6p to 346p after CSFB cut its target from 400p to 335p in the wake of this week's results and shares sales by directors.

Medical House rose 3 1/2p to 57p after signing up with an unnamed major drugs firm to develop a delivery device for one of its products. The deal is expected to be worth at least £7.5m over five years.

Bumper numbers saw polymer seals maker Wellington rewarded with a rise of 6 1/2p to 162 1/2p. Pre-tax profits for the six months to the end of June soared from £600,000 to £2.3m with the group forecasting an excellent full year.

UBS is more optimistic about Wolseley, 22 1/2p better at 919p, ahead of results next week. The broker has raised its target from 1033p to 1093p and upgraded earnings forecasts. Sugar producer Tate & Lyle, up 7 1/2p at 365p, has begun ticking better ahead of its next trading update.

Stockbroker and investment banker Shore Capital rose 1 1/2p to a three-year high 32 1/2p after US broker Lehman Brothers began coverage with an equal weight rating and 40p value.

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