Market report: Tuesday close

SHOCK WAVES created by the profits warning from French insurer Axa in Paris could be clearly felt in London today as shares of the big life assurers came under the hammer.

Axa's price fell almost 5% on the Paris Bourse as it warned earnings for the current year would be below market expectations, in the wake of events on 11 September. The company now expects to earn e1.2bn (£745m), blaming heavy losses in Germany and those stemming from the destruction of the World Trade Center in New York. That compares with brokers' estimates of between e1.5bn and e2.2bn.

Axa tried to sweeten a bitter pill by forecasting growth of 20% in earnings per share during 2002, given no further market weakness and normal trading conditions.

That came as cold comfort to British insurers which were marked lower, with CGNU down 22p at 818p, Royal & SunAlliance 1 3/4p off at 391 1/4, Prudential 2p down at 785p and Friends Provident 8 1/4p cheaper at 196 3/4p.

The biggest percentage fall was seen in the South African insurer and financial services group Old Mutual, which dropped 4 3/4p, or 5.2%, to 85 1/4p, just a smidgen above the year's low. The shares have been weak of late, partly because of the troubled South African rand. Buyers in London chased them up to 90p yesterday while the Johannesburg market was closed for the day. When it reopened today, one of the first things South African investors did was sell the stock.

Share prices generally were able to extend yesterday's gains supported by fresh advances by the Dow in New York this afternoon. The FTSE 100 index rose 14.8 to close at 5151.1. Trading conditions were again described as thin.

Pearson dropped 40p to 766p as the publishing-giant scuppered all City hopes that a revival had got under way in advertising revenues since its last update in October. Broker ABN Amro has cut its 2001 pre-tax profit estimate by 12% to £275 million.

Shell fell 3p to 457p despite yesterday's trading update to brokers during which it promised to increase substantially the amount of money paid back to shareholders in terms of cash handouts and dividends. US securities house Morgan Stanley remains neutral on the shares.

Misys firmed 12p to 339p after Commerzbank downgraded the shares from reduce to sell in the wake of the IT specialist's trading update. It reckons fair value for the shares is 250p. US securities house Lehman Brothers rates the shares market perform with a 280p target price.

Royal Bank of Scotland continued to rebound from recent lows with a rise of 17p to 1634p as ABN Amro raised its profit forecast for next year. HBOS fell 7p to 803p after Morgan Stanley lifted its target price for the shares by about 12% to 760p.

Someone bid 90p for food processor Pura Group as the price climbed 9 1/2p to 90 1/2p. Once again there is talk of a management buyout. The company valued at only £39m is said to own a valuable property portfolio.

National Grid rose 7 1/4p to 438p after US securities house Schroder Salomon Smith Barney upgraded the shares from outperform to an outright buy following a fall of 18% during the past month. The shares now stand at a two-year low.

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.

The Daily Mail's Cliff Feltham on yesterday's trade

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