Market report: Monday close

FOOD retailers made much of the running today as City investors waited for the next move in the struggle for control of

A handful of institutional investors, which speak for almost 50% of the supermarkets chain, are said to be bringing pressure on Sir Ken Morrison, boss and founder of Wm Morrison, to offer a cash sweetener in return for their support.

They would prefer a mixture of cash and shares, rather than all Morrison paper. Morrison's original offer of 276 1/2p valued Safeway at almost £3bn but lapsed after this and intended bids by rivals J Sainsbury, Tesco and Wal-Mart-owned Asda were referred to the Competition Commission. The City is well aware of Sir Ken's reputation for value for money and knows he is unlikely to pay over the odds. He may even choose to lower the terms of his bid following a decline in trading conditions at Safeway since the original bid was made.

On Friday, the Government finally gave the go-ahead for Morrison to become the only trade bidder. All the other food retailers were barred from bidding. Philip Green, the billionaire boss of clothes retailer Bhs, is waiting in the wings. He has also signalled his intention of making an offer and was cleared by the Competition Commission, but has still to make a move. Morrison rose 4p to 215 3/4p with more than 37m shares traded as Dresdner Kleinwort Wasserstein repeated its buy recommendation. Safeway responded with a rise of 6 1/2p to 282 1/2p.

Tesco, the biggest of Britain's food retailers, fell 1 1/2p to 239 1/2p after broker UBS raised its recommendation from neutral to buy and lifted its 12-month target price from 210p to 280p.

Tesco is also the first choice among the food retailers for broker Credit Suisse First Boston, which has resumed coverage of the shares with an outperform rating and 275p target price.

Rival Merrill Lynch has also resumed coverage of Tesco with a buy rating. Merrill says the Competition Commission's strict ruling on the Safeway bid will be good news for the market leader.

Shares generally traded below their best levels of the day. The FTSE 100 index fell 14.4 points to 4142.7 supported by opening gains on the Dow in New York.

BT Group saw more than 120m shares traded as the price rose to 1 3/4p to 185p. This included a line of 100m at 185 3/4p which was thought to relate to a currency conversion. There were also some big lines traded in Scottish Power, 1/4p up at 356p, which involved 55m shares at 356 1/4p and a further 50m at the same price.

A tranche of 90m shares in BAE Systems, 3/4p off at 170 1/4p, also went through at 173 1/2p as one institutional investor switched the stock from one fund to another.

Bid target Canary Wharf dipped 1 1/2p to 270 1/2p after Deutsche Bank told clients that shares of the property company should be sold. It reckons the City's expectations of a bid are far too high and estimates fair value at only 245p.

Financial services boutique Close Brothers rose 2 1/2p to 715p after turning in better-than-expected full-year numbers. Speculators are waiting to see what Caledonia Investments intends to do with its 18% stake in Close. Caledonia has come under pressure from its shareholders to sell the stake, which could pave the way for someone else to make a bid for the company.