Market report: Wednesday close

WE MAY be spending less money in the shops but it seems most of us are still happy to take advantage of low interest rates and borrow more money from the banks.

That is the conclusion of broker HSBC Securities in its latest review of the UK banking sector. Its equity strategy team has upgraded the sector from underperform to neutral, encouraged by the demand for loans and the prospect of industry consolidation.

Mortgage demand remains remarkably robust, accounting for the biggest percentage of overall borrowing as the housing market has regained its momentum during the past couple of months.

HSBC also says the recent spate of anecdotes serves notice that the theme of European banking consolidation is still very much alive and some UK banks are being cast as possible targets. More importantly, the British banking sector remains attractively priced despite its 'significant outperformance' over recent years, it adds.

Leading the charge were likely takeover targets Northern Rock, up 16p at 745p, and Bradford & Bingley, 6p better at 324p. Abbey National rose 7 1/2p to 586p and Alliance & Leicester 19 1/2p to 905p.

Shares were higher in general as fund managers, worried at being left behind by the market's recent surge, scrambled to pick up stock. The FTSE 100 index touched a 2003 high at 4393.8 before paring gains to trade 34.7 points higher at 4368.8.

ICI jumped 8 1/4p to 193 1/4p after a buyer picked up 12 million shares at 194 3/4p. Reckitt Benckiser jumped 50p to 1282p on a bullish trading update. The household products group said third-quarter trading was strong with revenue growth ahead of full-year targets.

Financial news provider Reuters rose
7 3/4p to 248 1/4p. Its separately quoted internet-based securities trading arm was in demand in the US yesterday on reports that one of the big mutual funds had called on the New York Stock Exchange to switch to electronic trading. BP dipped
2 1/2p to 432 3/4p despite US securities house Morgan Stanley lifting its earnings per share forecast for 2003 by 4% to 33.99p.

Pearson rallied, thanks to brighter prospects for financial advertising. The Wall Street Journal released figures showing a sharp turnaround in September and WestLB Panmure raised its target price to 660p from 610p as Pearson added 10p to 621 1/2p.

Biotech specialist Celltech gained 19 3/4p to 406 3/4p as US securities house Lehman Brothers repeated its overweight recommendation and lifted its target from 410p to 500p. EMI rose 6 3/4p to 180 3/4p on claims that Jim Fifield, former chief executive of its music division, has approached private-equity groups, including Permira and BC Partners, about a bid.

Ghanaian miner Ashanti Goldfield recommended an improved $1.4bn (£838m) bid from Anglogold of South Africa. Lonmin, where Ashanti is biggest shareholder, added 24 1/2p to 1040 1/2p and Anglo American put on 11p to 1211p. The deal will create one of the world's top gold producers.