Market report: Wednesday close

IT LOOKS like being full steam ahead for shareholders at luxury cruise line operator

The FTSE 100 index steering committee met today for its regular quarterly meeting to decide which constituents face the chop and to select their successors. GKN, down 1p at 284p, narrowly missed the chop last time and looked almost certain to be relegated, having seen its stock market value slump to just over £2bn.

Confirmation that P&O, valued at £2.54bn, would replace GKN in the index came just after the market closed.

P&O is in merger talks with nearest rival Royal Caribbean as both strive to make savings following a downturn in business after the 11 September terrorist attacks on the US. But whispers in the Square Mile on Tuesday claimed the world's biggest cruise operator, Carnival, may spoil the party by bidding for one or other of them. P&O Princess was demerged from P&O last year, and today broker Credit Suisse First Boston downgraded its profit forecast and lowered its target price from 264p to 255p.

The rest of the market lost an early lead as Wall Street suffered fresh selling this afternoon. The Footsie ended off 40.8 at 5120 in thin trading.

Abbey National shed a further 18p to 926p despite a 'buy' recommendation from stockbroker Williams de Broë. A circular on the company, entitled Nobody Loves Me, was sent to clients today, rating the shares a 'buy' with a target price of 1200p. The broker shrugs off the bank's £95m Enron write-off and says further provisions may be needed. But after rejecting the bid approach from Lloyds TSB, 11p lower at 706p, earlier this year the management has every incentive to get it right. The current rating offers value and the solid yield provides a comfortable cushion. Merrill Lynch has also upgraded the shares from 'neutral' to 'buy' while Royal Bank of Scotland added 8p at 1555p as Merrill moved from 'buy' to 'strong buy'.

More than 112m shares changed hands in Marconi as the price touched 51 1/2p before reducing the lead to 2.4p at 48.9p. The market seemed enthusiastic about the group's plan to link up with BT to install 28,000 public payphones with internet facilities. Brokers say the deal is likely to generate £100m of revenue for Marconi over the next eight years.

BT Group dipped 4 3/4p to 256 1/2p after naming Ben Verwaayen as its new chief executive. He is currently vice chairman of Lucent Technologies. Elsewhere in the telecoms sector, mmO2 shed 4 1/4p to 87 1/4p. US securities house Bear Stearns has begun coverage of the shares with a 'neutral' rating and a valuation of 79p. It describes the company as a classic recovery story, adding that it faces significant operational challenges.

A profits warning overnight from pharmaceuticals giant Merck in the US took its toll on European drug operators. AstraZeneca fell 47p to 3073p but GlaxoSmithKline recovered from an early fall to end unchanged at 1745p. Amersham retreated 1p to 633p as US securities house Lehman Brothers lowered its recommendation on the shares from 'buy' to 'market perform'.

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Today's gainers and fallers
Geoff Foster of the Daily Mail on yesterday's trading