Market report: Wednesday close

BLUE-CHIP share prices reacted positively in the end to Chancellor Gordon Brown's Budget as the City judged his proposals broadly neutral.

At the start of his speech the FTSE 100 was off 4.6 points but after he sat down the index was up

8.9 at 4437.8. At the close the Footsie was up 27.9 at 4456.8.

Earlier, a series of blue-chips going ex-dividend had depressed the Footsie. Lloyds TSB, off 13 3/4p to 419 1/4p, was the main culprit.

The only cheer for investors early on was that UK shares yield 3.5%, almost twice as much as on Wall Street, with more dividend increases on the way here.

The usual suspects in the drinks and tobacco sectors suffered from the Budget's inflation-related increases in tax. Imperial Tobacco fell 15p to 1185p. A modest 1p increase in tax on a pint of beer lifted Scottish & Newcastle 3 1/2p to 421 1/2p, Diageo 3 1/2p to 738p and SABMiller, 5p to 594p.

Housebuilders benefited from the Chancellor's commitment to building 120,000 new houses as indicated in the Barker Report, with the promise of less stringent land release controls.

Stockbroker Tony Craze has been backing Persimmon for some time and its shares hit a five-year high of 668, a healthy 36p rise.

Barratt bounced just 3/4p below its all-time high of 571 3/4p with a 22 3/4p gain to 571p. Westbury put on 22 3/4p to 469 1/2p and Wilson Bowden rose 32p to 1125p.

Defence stocks rallied as the Chancellor promised no cutbacks in spending, and Rolls-Royce added 6 3/4p to 217p, Smiths Group firmed 9p to 655p, BAE Systems 1 1/2p to 195 1/4p and Cobham climbed 8p to 1226p.

After a good opening day for bookies at the Cheltenham Festival, Lehman Brothers began coverage of oddsmaker William Hill. The investment bank set a target of 580p and the shares initially rose 7 1/2p, but later rested 2p up at 494p.

Russian metals entrepreneur Oleg Deripaska has taken a small stake in Anglo-Dutch steelmaker Corus. He will support compatriot Alisher Usmanov, who holds an 11.03% stake, in his bid to get a seat on the board.

Corus, back in favour thanks to the Russian stakebuilding, hit a peak of 46 1/4p earlier this month, having climbed from 6p in a year. Today, the shares added 3/4p at 41 1/4p despite expected losses of £200m when it reports tomorrow. The Russians control vital steel interests that can provide ore and semi-finished products on a vast scale.

MmO2 chief executive Peter Erskine confirmed the mobile phones operator is still open to merger offers despite having rejected a 110p approach from Dutch rival KPN.

Other bidders could include Spain's Telefonica and Hong Kong conglomerate Hutchison Whampoa. The shares, which dipped below 100p yesterday before recovering, today slipped 3/4p to 101 3/4p on volume of more than 56m.

Deutsche Bank upgraded engineer Weir to hold with a target of 260p after betterthan-expected results yesterday. The shares rose 2p to 277p.

Merrill Lynch analysts say the 30% rise in Tullow Oil since last July is a move too far. They have downgraded the explorer to neutral, leaving its shares 3p weaker at 103p.