Market report: Wednesday close

TALK of stakebuilding propelled

A report in today's Guardian newspaper claims Icelandic investors have spent more than £170m during the past few days building up a 3% holding. Confirmation is expected within the next couple of days, the report says. Icelandic retailer Baugur and Kaupthing and Landsbanki banks are tipped as possible buyers.

But M&S, up 5p to 351¾p, said it was unaware of any stakebuilding and appeared relaxed, suggesting the purchase of its 'undervalued shares' did not come as a surprise.

Brokers say the speculation has helped underpin the shares in recent days despite reports that trading remains dire at Britain's biggest clothing retailer.

Last year, the M&S board, under new chief executive Stuart Rose, rejected a proposed £9.1bn from Bhs tycoon Philip Green worth 400p a share.

But brokers say a new bidder is unlikely to emerge.

Richard Ratner at Seymour Pierce is sceptical that Icelandic interest will result in a bid, and reiterated his underperform rating on M&S. Nick Bubb at Evolution Securities does not think the shares are worth more than 300p and retains a reduce rating. He does not expect profit recovery this year or next.

Shares traded within a narrow range, unable to draw inspiration from Wall Street where a higher oil pricehelped push down numerous major stocks, including United Technologies and Caterpillar. By midday, the Dow Jones Industrial Average was 26 points or 0.25% adrift at 10,521.79. In London, meanwhile, the FTSE 100 index fell 27.3 points to 5060.80.

Vodafone hardened ½p to 135¾p despite US broker Smith Barney repeating its sell recommendation after a meeting between the two yesterday. But the mobile phones giant is favoured by rival investment house Dresdner Kleinwort Wasserstein.

Rentokil Initial rose 1½p to 151¾p as a principal trade went through in 26.62m shares at 150p. BAE Systems dipped 2½p to 278½p as Credit Suisse First Boston placed 10m shares at around 278p.

AstraZeneca fell 30p to 2246p after being hit with a e60m (£39.9m) EU fine over market misuse surrounding its blockbuster stomach ulcer drug Losec. AZ was censured by the European Commission anti-trust authorities for illegally trying to prolong Losec's patent protection. It follows a six-year probe into allegations the company misused national patent systems. But Seymour Pierce has repeated its buy recommendation, saying the penalty does not seriously harm its prospects. AZ plans to appeal.

Further gains in Government bonds prompted selling of utilities, with Severn Trent down 30p at 1028p, Scottish & Southern off 30p at 971p and International Power down 5p at 189p.

Housebuilders have enjoyed a good run but broker Numis thinks it may be coming to an end. It has downgraded Bovis, off 2p at 686½p, Persimmon, 9½p cheaper at 737½p, Redrow, down 10p at 395p, and Taylor Woodrow, 3¾p easier at 323p, from hold to reduce. Wilson Bowden, off 5p at 1122p, has also been cut from add to hold. Numis says house prices will continue to fall, putting builders under further pressure.

It was the first day on Aim for Granby Oil & Gas following a placing by broker Peel Hunt at 84p. The shares settled at 101p. Also making a debut on that market was Empire Online, which provides marketing services for online gaming, following a placing by Numis at 175p. The price touched 190p then settled at 173½p.