Market report: Tuesday close

CANVASSING for the General Election has already begun to take a big toll on investor sentiment - and there is still almost a month to go to polling day.

Brokers say investors have retired to the sidelines and are likely to remain there until after votes are cast on 5/5/05. As a result, share prices were left to find their own levels today.

Trading was thin with few investors willing to open new positions. This was reflected in the FTSE 100 index, which closed 27 points lower at 4946.2. Wall Street opened lower this afternoon on the back of the latest US trade deficit, which has hit a whopping $61bn (£32.3bn).

The higher oil price failed to cut much ice with BP, closing 4½p lower at 555½p. A parcel of 65m shares went through at 559p.

Royal Bank of Scotland lost a further 15p to 1655p. Weekend reports claimed the group, which owns NatWest, wanted to buy up to 25% of Bank of China for £2bn. Brokers say RBS may choose to sell its remaining stake in Spain's Banco Santander to help finance the deal. Lloyds TSB retreated 6p to 473½p as a currency conversion went through in 50m shares at 478p.

HSBC dipped 1p to 838½p. Deutsche Bank reckons the group's bad-debt provisions will benefit from changes to US bankruptcy laws. Consumer finance specialist Cattles rose 8p to 320½p after a stock overhang was cleared from the market. US broker Smith Barney placed two lines totalling 2.5m shares at 316½p.

Bid target Allied Domecq slipped 6½p to 638½p despite claims the drinks giant is close to agreeing terms of 675p a share with French rival Pernod Ricard and its partner, US outfit Fortune Brands.

That would value Domecq at £7.46bn, excluding debt and would put the shares on 18 times current earnings, which compares with an historic 10 times. The message from City speculators today was 'take the money and run'.

Plasterboard manufacturer BPB rose 5½p to 495½p supported by Deutsche Bank, which has raised its recommendation on the shares from hold to buy and lifted its target price from 400p to 565p. It says BPB is a long-term play and plasterboard is the only growth product in the building sector. The company benefits from a strong balance sheet, respected management and focused strategy.

Tesco fell ¼p to 318½p after its profits topped £2bn for the first time. Broker Seymour Pierce was pleased with the outcome and continues to rate Tesco a buy.

By contrast, Marks & Spencer rose 13¾p to 354¾p despite news of another slump in sales. City investors must regret not being able to take up last year's 400p-a-share offer from billionaire financier Philip Green, and he must be breathing a sigh of relief that, in the end, he never made the bid.

Chemicals giant ICI dipped 3¾p to 268½p but continues to attract the support of brokers despite the impact of a higher oil prices on margins.

BT Group was off 1½p at 203½p as Dutch broker ABN Amro upgraded the shares and raised its price target to 190p. Office rental group Regus, up 3¾p at 120½p, benefited from a positive presentation to fund managers arranged by broker Dresdner Kleinwort Wasserstein yesterday. DKW expects brokers to begin upgrading the shares following what was said.

Hays, down 2¼p at 138p, has been upgraded from underperform to in-line by broker Cazenove, which has told clients that the UK recruitment cycle has become more benign.