Market report: Friday close

PUNTERS were baling out of

The shares slid 10p to 1640p as ABN Amro downgraded RBS to reduce and sliced nearly 25% off its target to 1500p. The broker says the bank is likely to invest substantial amounts in Europe and Asia to broaden the geographic source of its revenues. It argues that with senior management pay based on earnings per share rather than return on capital, profitability will be sacrificed.

It predicts profitability will erode more quickly from this year and that a sale of the Citizens business would be the best step forward to crystallise value.

There was precious little cheer for the rest of the sector as dire warnings on falling consumer spending and a sharply contracting mortgage market took their toll on the High Street lenders.

Northern Rock fell 5p to 749p, hit by a downbeat assessment from CSFB, which is worried the bank looks undercapitalised under new IFRS accounting rules. The broker warns that a 22% rise in costs will hit first-half results. Its calculations suggest earnings per share will be 69.6p - below the bank's own expectation of 72p.

Alliance & Leicester was down1p at 866p while Bradford & Bingley was 3p lighter at 301½p. Barclays fell 4½p to 543p amid talk that Morgan Stanley is trying to place 12m shares at 545p.

A good showing by telecoms enabled the market to extend this week's rally with the FTSE 100 up 9.1 at 4971.8. O2 was a big blue-chip climber, up 3¾p at 124½p, along with Vodafone, 4¼p higher at 145p.

With no fresh US economic news on the agenda, traders were expecting the Footsie to rely on its own steam to remain in positive territory. After yesterday's robust performance on Wall Street, investors seemed to lose their appetite for US equities. In early trading, the Dow Jones was down 31.70 points at 10,461.50.

Over here, Anglo American was another strong performer, up 20p to 1276p on the back of an upgrade from Morgan Stanley to overweight from underweight.

Compared with rival miners BHP Billiton, down 7½p at 636½p and Rio Tinto, 25p off at 1594p, Anglo is now looking cheap. But what interests Morgan Stanley is a strong free cashflow, which underpins a higher dividend yield than its peers and gives room for future rises. A positive assessment of the new chief executive is further justification for the rating upgrade.

A fall in margins at bookmaker Ladbroke hit its biggest rival, William Hill, hard. Hill, down 5p at 509½p, is in the process of becoming Britain's largest bookie following its takeover of Stanley Leisure's betting shops but Lady Luck is smiling on the punters, not investors, at the moment.

According to Ladbroke, owned by hotels operator Hilton, the squeeze on margins is due to too many favourites, particularly horses, winning. Hilton, down 1½p at 275p, was shored up by steady growth in the hotels division.