Footsie on the rocks

DEALERS' screens were a sea of red before the Chancellor's Pre-Budget Report. And they remained red during his fairly bullish view of the growing economy, followed by his sad admission that the UK will have to borrow £10bn more than he had predicted earlier this year, putting Britain £37bn in the red.

The flagging Footsie, already 67 points lower five minutes before his speech, closed a miserable 44.2 points easier at 4335.4. Concern about the dollar's weakness and the overseas earnings potential of 40% or so of the Footsie's constituents had prompted an early sharp markdown.

The dollar had its biggest rise yesterday against the yen for almost a month after Japan sold its currency to protect exporters, and it was little changed at $1.2245 against the euro. Sterling made the most of it, improving against the greenback to $1.7445.

Several brokers, including Bear Stearns, believe the Fed made the wrong choice in keeping its commitment to accommodative monetary policy for a 'considerable period', while leaving US rates unchanged at 1%. It fears it will exert further downward pressure on the greenback, which will hinder Wall Street's progress.

AstraZeneca was one bright spot. The drugs giant touched 2634p before closing 12p up at 2616p after JP Morgan initiated coverage with an overweight rating and fair value target price of £32.

It believes AZ has the sector's most attractive growth outlook. The market has underestimated the impact of schizophrenia treatment Seroquel's established, higher-margin franchise. The anticoagulant Exanta should be approved for chronic use in the US by the first quarter of 2005.

Punch Taverns closed as flat as a pint of homemade scrumpy at 401 1/4p, down 28 3/4p. Texas Pacific, the venture capitalist, is £170m better off after selling its 21.8% stake of 54 million shares at 415p.

The stock was placed with institutional investors. Other sellers included Morgan Stanley's private equity arm and George Soros's Quantum Fund.

Pizza restaurant group Ask Central sizzled 12 1/2p higher to 169p after finally agreeing merger terms with Caffe Uno owner City Centre Restaurants (1 3/4p easier at 70 1/2p), offering more than 166p a share and valuing Ask at more than £;158m.

Bodycote, the metallurgical coatings group, collapsed 24p to 140p following a profit warning. It said second-half sales will be 4% below the £228.1m reported in the first half because of the dollar's weakness, a further reduction in automotive demand in France and the US and power failures in North America and Italy.

Luxury car dealer HR Owen was left with a big dent in its share price at 165 1/2p, down 16p, after incurring an annual trading loss of £2m compared with a £2m profit last year.

Virgin branded products distributor Victory Corporation fell 26p to 184p after warning that a recent drop in consumer confidence has led to a marked decline in trading in the past two weeks. Interim losses were reduced from £3.4m to £1.47m.

Stricken Premiership football club Leeds United scored a speculative gain of 1p to 5 3/4p after the club confirmed it is talking to parties interested in making a bid.

Eckoh Technologies edged up 1/2p to 18p after extending its alliance to provide British Telecom's customers with advanced speech recognition technology.

Dmatek , which provides electronic monitoring technology, improved 1p to 75 1/2p. It has won its second US prison contract to supply a pioneering wireless inmate tracking system.

Proving yet again it's always better to travel than to arrive, British Airways lost 7 3/4p to 220p and

Hays shed 2 1/4p to 126p on profit-taking after having their promotion to the Footsie confirmed. As expected, they take the places of Provident Financial , 9 1/2p down at 618p, and Mitchells & Butlers , 9 1/4p easier at 226 1/2p.