Market report: Monday close

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Speculation was continuing to increase that Reuters has agreed terms for the disposal of its 62% stake in Instinet with the Nasdaq stock market and private equity outfit Silver Lake Partners in a deal worth about $1.8bn (£900m).

They would split the business in two, with the electronic trading platform going to Nasdaq and the broking arm to Silver Lake. Broker Numis says such a move would be disappointing.

Instinet shares were chased almost 13% higher to $6.49 on Friday as the story gathered pace. But talk in the Square Mile is that Reuters has agreed terms with the two bidders worth less than the current ruling price. Some estimates have valued the business as high as $2.5bn. Reuters originally put the For Sale sign on Instinet in September when the shares were trading at $4.84.

The London market fell sharply, trading at its lowest since 21 January. The FTSE 100 index dipped briefly below 4800 before reducing the fall 64.5 points to 4827.1. Wall Street saw the Dow Jones Industrial Average plunge almost 200 points on Friday and 4% lower on the week amid worries about the US economy.

That selling spread to the Far East today with Tokyo the worst hit, reflecting its increasingly fractious relationship with China, the world's fastest-growing economy. Dealers were braced for fresh selling in New York this afternoon.

By midday in London, not one of the 100 companies that make up the leading blue-chip index was showing a rise on the day. Worst hit was fund manager Amvescap, down 2¾p at 313¾p, but losses were spread across the board with steelmaker Corus falling ¾p to 49¾p and computer services group Sage off 2¾p at 201p.

GlaxoSmithKline dropped 19p to 1246p. US securities house Lehman Brothers reckons the City has had a downer on the drugs giant for some time because of concerns about consent agreement with the US Food and Drug Administration over its Puerto Rico plant. Lehman reckons the shares have been oversold and is sticking with its overweight rating and 1320p target price.

Bid target Allied Domecq was steady 640p ahead of full-year numbers on Thursday. Brokers say the results may be the signal for French rival Pernod Ricard and Fortune Brands of the US to make their £8bn bid. They say the terms could be worth around 670p a share.

One of the dozens of oil stocks to cash in on the energy boom on the Alternative Investment Market (Aim) in the past year, Imperial Energy, went some way to justifying its rating today with an encouraging drilling update. The company has struck oil at one of its new wells in Western Siberia and reported strong flow rates at two more. The shares, which listed at 31p, fell 42½p to 362½p.

It was the first day of dealing in South China Resources following a placing of 60m shares by broker Hitchens Harrison at 5p to raise £3m. The price touched 6.25p before settling back at 5p.

Elsewhere on Aim, Incite Holdings returned from suspension down 23¾p at 3¾p as a cash shell after putting its remaining trading division into liquidation.