Market report: Thursday close

THE proposed £1.8bn merger between life assurers Resolution Life and Britannic may be good news for savers but is bad news for fund manager

Until now, F&C handled £22bn of assets held by Resolution, which includes the former Royal & SunAlliance life business. But Resolution and Britannic, which now between them speak for £125bn of assets, plan to manage those in-house.

The funds generated about £28m of management fees for F&C last year, and their loss is expected to signal a series of profit downgradings by brokers. Resolution intends to pay F&C compensation of up to £27m for the loss of the contract, which will expire in 2006.

Share prices generally traded in a narrow range as the Bank of England pegged interest rates at 4.75%. The FTSE 100 index closed 5.5 points higher at 5009.2 with Wall Street also posting losses this afternoon.

The knives were out for supermarkets chain Wm Morrison in the wake of its fifth profits warning in less than a year, and City analysts were cutting deep.

Lehman Brothers has slashed its target from 205p to 170p while retaining its equalweight rating. The shares fell a further 5½p to a low 177½p. The broker says it is unclear how much of the weakness relates to gross margin, brought on by competitive pressure, and how much is blamed on the integration costs of the £3.2bn acquisition of Safeway.

Rival broker Merrill Lynch is an outright seller of Morrison while Goldman Sachs is underweight and Smith Barney has slashed its profits forecast from £245m to £100m. Morrison says it expects profits of between £50m and £150m, having previously declined to give guidance.

Falling out of the FTSE 100 index following the quarterly reshuffle are Corus, down 1¼p at 41¾p, and Bunzl, 1½p off at 529½p. Taking their place will be plasterboard maker BPB, 1p down on on 510p, and property developer Hammerson, 14p down at 910p.

In the FTSE 250 index, insurer Alea, 6¼p dearer at 185p, drops out along with Scottish Media Group, ½p higher at 92p. They will be replaced by recently refloated spread bookie IG, 6¼p higher at 136¾p, and Foreign & Colonial Property Trust, up 3½p at 113p.

Centrica fell 3p to 223½p after a line of 10m shares went through at the lower level. Bermuda-based underwriter Catlin fell 11p to 404p. Goldman Sachs placed 17.35m shares at between 402p and 407p. The seller was reckoned to be JP Morgan's investment vehicle Corsair.

Paul Heiden, the former Rolls-Royce executive who has been running FKI for the past two years, reckons the worst is over at the engineering conglomerate, which seems to have been in a permanent state of turmoil. Losses last year tripled to £61m but Heiden claims the underlying performance from its continuing businesses was 7% better. The dividend is pegged at 4.5p. The shares rose 4p to 101¾p.

Another flurry of speculative buying carried Urbium up 72½p to 772½p. The shares shot up after it received an offer from Regent Inns, 1½p better at 79p. The terms undervalued Urbium and were rejected. Now Regent may go hostile.

It was the first day of trading for Caliber Global Investment following the sale of 15m shares at $10 (549p). They started life at $10.15.