Market report: Wednesday close

THE threat of the first interest rate rise for three-and-a-half years, within the next few weeks, could spell the end of the house market boom and derail the gravy train for Britain's army of highly profitable housebuilders.

That was the conclusion reached following publication today of the minutes of the last Bank of England monetary policy committee meeting.

It voted five-to-four to peg rates at 3.5% but the City says that indicates the next move will almost certainly be upwards. Those fears were being reflected today in a stronger pound while the reaction of short-sterling indicated rates could rise to 5% during the next 12 months.

Shares of housebuilders were hard hit, accounting for seven out of 10 of the biggest fallers among the top 250 companies. Persimmon led the way lower with a loss of 38p to 499p, while Westbury shed 28p to 420 1/2p, Barratt Developments 32p to 504p, Redrow 16p to 302 1/2p, Bovis Homes 24p to 460 1/2p, Wilson Bowden 52 1/2p to 997 1/2p and Berkeley 43p to 773 1/2p. Housebuilders have been among some of the best market performers this year, fuelled by rising property prices and mergers.

The prospect of dearer money pulled the rug from under share prices across the rest of the market too. The FTSE 100 index fell 66.7 to close at 4285.6 undermined by opening dips on Wall Street this afternoon.

Premier League side Manchester United netted a 5 1/2p rise to 241 1/2p as several large lines of stock went through on the ticker. They included 795,438 shares at 245p and 215,320 at 239p. Are we seeing more stakebuilding by Malcolm Glazer, owner of NFL American football champions Tampa Bay Buccaneers, who last week increased his stake to almost 10%?

Shares in Debenhams, which fell 4p yesterday, lost a further 4 3/4p to
466 3/4p today, reflecting worries that Laragrove wi ll be unable to raise the finance to up its terms.

A bid victory for Baroness would be bad news for Debenhams chief executive Belinda Earl, who is unlikely to stay on if they win. But she will collect about £3m when the takeover goes through.

Rival Next hardened 8p to 1180p on the back of Deutsche Bank repeating its buy recommendation while lifting its target from 1150p to 1500p. It sees long-term growth.

Drinks giant Diageo added 1p at 684p after reporting signs of recovery in its US market. Prospects for the year remain unchanged. Scottish Power retreated
3 1/4p to 345 1/2p after a line of 55m shares went through at 355p.

BT rose 1 1/4p to 184 3/4p after broker UBS upgraded from reduce to buy and lifted its target from 154p to 220p. The shares have underperformed this year and now look cheap against the rest of the sector.

BAE Systems fell 6 1/2p to 172 3/4p on reports that merger talks with General Dynamics in the US had collapsed. Broker Dresdner Kleinwort Wasserstein has downgraded from add to hold and urges clients to take profits. Lloyds TSB lost an early lead to trade 6 1/4p cheaper at
413 3/4p despite reports it has reached agreement on the sale of its National Bank of New Zealand unit for £2.15 billion to Australia and New Zealand Banking Group.

Northumbrian Water was steady at
102 3/4p despite UBS repeating its reduce rating and 86p target. SSL International was 5 1/2p firmer at 304p after its trading update. The Durex condomsto-Scholl footwear group says sales for the first six months are likely to be around £316m, with operating margins of more than 10%.