Market report: Monday 16:30

BROKER Merrill Lynch has issued a stark ultimatum to management at

Merrill has raised its rating from sell to neutral because it believes the price has stabilised, but allied this to a call for improvements at the top. It says the management team lacks drive and focus, the reporting structure is complicated and the trading strategy in clothing is wrong for value-conscious customers. Further profit down-gradings could not be ruled out. But the shares rose 2 1/2p to 278 1/2p.

Electrical retailer Dixons rose 1/4p to 137 1/4p as it anxiously awaited the Government's ruling on extended warranties, expected this week.

An inquiry into warranties has hung over Dixons for most of the year, but hopes are growing in the High Street that the Department of Trade & Industry will insist on small changes to the system of selling them instead of the wide-ranging alterations demanded by some consumer groups.

Dixons, which is thought to earn about 20% of group profits from extended warranties, is said to have argued its corner well.

Kesa Electrical, down 5 1/4p at 242 3/4p, which owns rival Comet, will also be affected by the outcome of the ruling. Kesa demerged from Kingfisher earlier this year.

Share prices generally drifted lower in thin trading. Sentiment continues to be undermined by a weaker dollar, which erodes the profits of British companies trading in the greenback or investing in the US.

The FTSE 100 index fell 21.5 points to 4345.2, partly reflecting a big slide for the Dow in New York on Friday. The US Federal Reserve meets tomorrow to decide on the next move for interest rates.

Anglo-Swedish drugs giant AstraZeneca rallied from an opening fall to trade 25p better at 2641p. Investors are becoming increasingly excited about prospects for Exanta, a treatment for thinning the blood to help prevent strokes.

Latest data released on the drug indicates improved efficacy and fewer side-effects than in existing treatments, such as Warfarin, which has been around for 50 years.

Drugs company CeNeS Pharmaceuticals, which is listed on AIM, advanced by 1p to 8.87p on news that Anglo-American giant Glaxo-SmithKline, 2p firmer at 1282p, has bought 13.3 million shares, a 5% stake. City speculators have been left wondering if this could signal a commercial tie-up between the two companies, or even the possibility of GSK making a full bid.

GSK seemed unfazed by reports that a senior executive had admitted most of its prescription drugs do not work.

Pubs chain Mitchells & Butlers came off the boil after Friday's rise, down 1/2p to 231 1/2p. Chief executive Tim Clarke has bought 70,000 shares in the company at 229p, raising his total holding to 279,703 shares.

Rexam was up 1 3/4p at 429p after US securities house Morgan Stanley began coverage of the shares with an overweight rating.

Fund manager Savoy Asset Management marked time at 130p after reporting a narrowing of first-half losses.

Chorion , which owns the children's character Noddy, rose 14 1/2p to 208 1/2p despite rejecting a bid approach from Entertainment Rights, saying that the offer significantly undervalued it.