Market report: Tuesday close

ANY lingering hopes Merrill Lynch may have nurtured about retaining the joint corporate brokership of drinks giant

Still, the timing of the publication is bad for Merrill, coming as the world's biggest spirits supplier considers a change of house broker. Diageo has not changed its current joint brokers, Merrill and Cazenove, since it was created by the merger of Guinness and Grand Metropolitan in 1997, but insists it regularly reviews the situation.

Last week, six banks lined up in a beauty parade to pitch for the job. They were Morgan Stanley, Deutsche Bank, Credit Suisse First Boston and Goldman Sachs, as well as the two incumbents.

Square Mile gossips say Morgan Stanley looks odds-on favourite to win the day. Diageo chief executive Paul Walsh was a big buddy of Paul Baker, head of Morgan Stanley's UK broking arm, when he was on the books previously at Merrill. Baker and his team moved to Morgan Stanley last year.

Diageo feels the need to make changes following the recent growth in hedge funds and defections among leading brokers. Cazenove's proposed merger with US investment bank JP Morgan is seen as another reason for the move.

Share prices generally traded in a narrow range, with the FTSE 100 index rising 30.7 points at 4,843.2.

Tate & Lyle's commodities businesses have come under pressure in the annual sales contract pricing round. In Europe, margins on glucose, fructose and other starches and sweeteners will be down on last year. But Tate's soaraway share price has been due to the success of its Splenda sucralose product, which is not included in latest figures. Perhaps more important will be this week's earnings announcements from US rivals CPI and ADM. Tate slipped 4½p to 461½p.

The buyers have started to nibble away at photo-booths operator Photo-Me, up 5p at 96½p, following a sharp slide in the shares last year.

Yesterday it met institutional investors. Broker Evolution Gregory, which organised the meeting, rates the stock a buy. Only last week, chairman Dan David bought a further 900,000 shares, taking his total to 2.9m, or less than 1%.

British Airways fell 5½p to 250½p, just off its six-month high. Credit Suisse First Boston raised its full-year, pre-tax profit forecast from £409m to £425m, before write-offs, ahead of next week's third-quarter numbers.

Mobile phones giant Vodafone, 1¼p dearer at 139¾p, has climbed from 114p since last summer and Merrill Lynch reckons clients should continue to buy, setting a 155p target. Rival house ABN Amro has raised its rating from add to buy with a 165p target.

Merrill is advising clients to sell building products supplier Wolseley, off 21p at 1056p, and switch into satellite broadcaster BSkyB, ½p better at 550½p.

Broker UBS has begun coverage of the port operators with a reduce rating on AB Ports, down 7½p at 465¼p, and 450p target. Mersey Docks, ½p off at 981p, is seen as reduce with a 930p target, while Forth Ports, 15p higher at 1375p, is neutral and carries a 360p target.