Market report: Monday close

FEARS of an increase in interest rates and the dollar's slide combined to depress London shares. Financials led the retreat, but blue-chips ended off their lows despite an early sell-off on Wall Street.

The long period of low interest rates may be coming to an end, say 11 out of 12 leading City economists. They forecast the Base rate, currently 3.5%, will rise in the first six months of 2004, by as much as half a percentage point, and that it may be as high as 4.5% in 2005.

The Group of Seven meeting call over the weekend for more flexibility on foreign exchanges knocked the dollar. That in turn hit British blue-chips, many of which derive their earnings in the US currency.

Anglo-US fund manager Amvescap led the plunge, falling 28 1/2p to 520p, a 5% slide. Old Mutual fell 3 1/4p to 94 3/4p and Prudential 11 3/4p to 452 1/4p. The FTSE 100 dropped 28.8 points to 4228.2.

BSkyB fell 15p to 621p on reports that Rupert Murdoch may step down as chairman to placate shareholders opposed to his son James taking over as chief executive.

Checkouts in the supermarket sector were in full flow today as reports that the long-awaited Competition Commission decision on Safeway would recommend that only Wm Morrison be allowed to bid.

If it does, Morrisons will have to offer more than the 277 1/2p a share it pitched in January. Safeway today rose 6p to 303 1/4p and Morrison 7 3/4p to 224 1/2p. J Sainsbury slipped 2 1/2p to 290 3/4p as hope faded that it could bid for Safeway, or do a deal with Morrisons over some of the stores it might acquire. Tesco slid 2p to 240 1/2p. On the sidelines, billionaire retailer Philip Green, owner of Bhs, says he is still in the running.

American interest in ITV was repudiated by Granada, down 2 3/4p at 99 3/4p, and Carlton, down 4 1/2p to 173 1/2p, who have their own plans to cosy up to one another in a £4bn merger. US-owned Viacom, the world's biggest media group, and Saban Capital Group, both owned by billionaire Haim Saban, could still be interested once the merger is completed.

Abbey National's disposal plans received a setback as it pulled out of a sale of offshore life insurer Scottish Provident International, for which it had hoped to get £100m. Abbey slipped 6p to 536 3/4p.

EMI dipped 6 1/2p to 151 3/4p after saying it was in preliminary talks with AOL Time Warner to buy its recorded music division for about $1.5bn (£915m) in a shares-and-cash deal. Broker Lehman has set a 130p target.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed on the site.