Market report: Wednesday close

AN EARLY rally turned into a rout as United Utilities plunged by almost 12% - a fall of 63 1/2p at 468p. Earlier the shares had sported a useful rise of 15 1/4p despite going ex the group's recent £1 billion rights issue.

The shares opened at 459 1/2p today after taking into account the five-for-nine rights issue. Blue-blooded stockbroker Cazenove has been telling clients to buy the shares, leaning heavily on the generous yield of 9.6%.

The broker also points out they are now trading at about an 18% discount to the current target price of 560p.

Rival broker UBS has repeated its neutral rating on UU but has slashed its target price from 525p to 455p, ex the rights. Rival Kelda Group fell 17 3/4p to 419p.

Also in utilities, debt-laden British Energy stood out with a jump of 0.99p to 6p in heavy turnover. Dealers say the group's creditors may be close to agreeing a refinancing package.

The FTSE 100 index closed 29 points higher at 4206.4, partly held back by early falls on Wall Street.

Drugs giant AstraZeneca was up 70p to 2519p after US securities house Morgan Stanley repeated its overweight view of the shares.

Troubled life assurer Prudential lost an early lead to trade unchanged at 430p despite one big player promising better times ahead. US investment bank JP Morgan has raised its recommendation on the shares from underweight to overweight and lifted its fair value estimate from 319 1/2p to a whopping 525p.

The change in stance reflects JPM's belief that fundamentals at the Pru have altered a lot. The recent rally in the stock market has given a degree of confidence back to the saver.

The investment bank also highlighted the group's move to cut its dividend. This is expected to allow investors to focus on the longer-term growth story, which it describes as 'compelling'.

Elsewhere in the sector, broker UBS has downgraded Royal & SunAlliance from buy to neutral while retaining its 12-month target price of 160p. The shares traded 4p cheaper at 145p.

Insurance broker SVB Holdings firmed 1p to 67p after a bullish trading update. The group says the 2002 and 2003 years of account at its Lloyd's managing agency SVB Syndicates continue to develop favourably.

Fast-growing biotech specialist Acambis, up 7p at 355 1/2p, will miss first-half revenue targets after delays in delivering a batch of its smallpox vaccine to the US. The group has been working on a new labelling design for the vials, which form part of its bumper $428m (£273m) deal with the US Centers for Disease Control and Prevention.

Financial services specialist London Forfaiting was unmoved at 30 1/4p after First International Merchant Bank announced that the level of acceptances for its offer had reached 65%, or 68.1m shares.

Oil industry services group James Fisher slipped 6p to 199p after raising interim pretax profits from £5.8m to £6.5m. Broker Evolution Beeson Gregory has pencilled in £11m for the full year with a target price of 257p.