Market report: Thursday 16.00

SERVICES company

The shares lost an early lead, falling 10 1/2p to 158p, after the company gave a rundown following the end of its six-month trading period.

Serco talked of a 'strong flow' of new contracts and trading in line with expectations that will lead to double-digit earnings growth. But the brokers turned bearish when they discovered restructuring costs of £4.5m , involving 120 job losses. Some of them were also expressing concern about the group's accounting. Merrill Lynch cut its rating from 'buy' to 'neutral'. The shares are now trading on 16 times earnings and Merrill says they are fully valued.

There was heavy turnover in BT Group, down 1 1/4p at 199 1/4p, as more than 125m shares changed hands. A line of 100m shares went through at 195p as part of a late conversion trade. This may have been the result of a switch from American Depositary Receipts into order shares, made attractive by recent currency fluctuations.

Share prices traded in narrow limits. The Dow suffered opening falls after US unemployment hit a fresh 9-year high. But as Wall Street is closing early today ahead of tomorrow's Independence Day celebrations, London's reaction was muted. The FTSE 100 fell 1.1 points to 4005.8. Gilts reversed Wednesday's falls as investors moved back in.

Next Group was pursued as Deutsche Bank raised its rating on the fashion chain to 'buy'. It has also raised its price target to 1150p, and the shares shot up 15p to 1025p. The Germans adore the retail sector and have put Kingfisher as their second choice, setting a 320p price target. It slipped 3/4p to 275 1/2p. Merrill Lynch also likes Kingfisher and has upgraded to a 'buy' from 'neutral'. It has set a price target of 270p for the Kingfisher rump once Kesa is floated off. In its review of the rest of the retail sector, Deutsche believes GUS, up 7 1/2p to 681p, and Dixons, down 3p at 127 1/4p, represent fair value.

SMG fell 10p to 75p with its broker ABN Amro considering a move to downgrade its 'buy' rating on the shares.

CSFB placed up to 30m shares in Bookham Technology on behalf of Nortel Networks, which took a 30% stake in Bookham last October. Bookham shares tumbled 13 1/2p to 71 1/2p. Merrill Lynch placed 7.5m shares in media group Aegis, 1p lower at 79p, at 77 3/4p.

Alba rose 6p to 508 1/2p after broker Investec placed 5.1m shares, or 10% of the company, at 495p. The shares belonged to the Harris family, which founded the maker of radios and DVD players.

A gloomy trading update left Cookson 1/4p cheaper at 24 1/2p. The engineer reported a year-on-year drop of 3% in second-quarter sales and plans to cut 160 jobs. It blames the setback on the Sars epidemic and the Iraq war.

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.