Market report: Tuesday close

THE London market looked tired as it limped towards the close of the third quarter weighed down by lacklustre economic news.

A dismal US consumer confidence number showed Americans at their gloomiest since the Iraq war while in Britain the small rise in second-quarter GDP and a surge in the trade deficit from £2.3bn to £8.6bn left investors cold. A weaker dollar and sharp opening falls on Wall Street only added to the gloom and left the FTSE 100 index down 51.4 at 4091.3.

Banks and insurers lost early gains. Banking outfit HBOS dropped 5 1/2p to 688p despite favourable comment from a clutch of brokers. HSBC Securities has upgraded the shares from add to buy while repeating its target price of 868p. US securities house Smith Barney has also added the shares to its list of stocks to buy following a major review of the banking sector.

It argues that HBOS continues to deliver 'superior growth' rates with little evidence of a subsequent increase of risk.

Abbey National, currently undergoing a makeover and change of name, slipped 10p to 494p after Smith Barney moved the shares up from sell to hold (if you had taken the advice to sell, it is unlikely you would have any left to hold) and raised its 12-month target price from 450p to 550p. It still sees signs of improvement in the share price but warns there will be no significant re-rating without proof that its retail strategy is delivering.

Smith Barney also looks favourably on Lloyds TSB, down 9 1/4p at 413 3/4p, where it has raised its profit estimates and increased its price target for HSBC from 700p to 725p. Royal & SunAlliance was the second-heaviest traded bluechip with the price dipping 4p to 80 3/4p as more than 75m shares changed hands. Brokers are at odds over prospects for the insurer. US securities house Morgan Stanley has repeated its underweight rating and slashed its target price from 90p to 64p.

That could spell trouble for the group, which recently announced terms of a £960m rights issue at 70p, underwritten by Cazenove, Merrill Lynch and Goldman Sachs. The big hedge funds have been selling RSA in order to pick up the nil-paid cheaply. They traded 3 3/4p lower at 11 1/4p. MS complains that the fund-raising will result in further dilution of the shares. But US investment bank JP Morgan has upgraded RSA to neutral although it warns the shares remain high-risk.

Legal & General slipped 2 1/2p to 92 1/4p although US broker Bear Stearns has resumed coverage of the shares with an underperform rating and a 103p target price. Underlying the fact that it takes two views to make a market, broker Williams de Broë is switching out of Aviva, down 15p at 467p, and - yes you've guessed - into L&G.

'Stop being mean' was the message to Manchester United, down 4p at 196p, from its own broker. ML says the payout should be 11p a share, not a stingy 4p. But the City had the knives out for Newcastle United, which slumped 2 1/2p to 30 1/2p as various rumours circulated. Turnover reached 300,000 shares in a market where dealers will normally quote a price in 2000 at a time. The club said rumours that manager Sir Bobby Robson was about to resign were untrue.

MyTravel rose 1p to 19 3/4p after reaching agreement with bankers to restructure its debts. British Energy fell 0.4p to 5.35p even though hopes grew for a rescue deal.