Market report: Wednesday close

OIL GIANT

Spanish newspaper La Gaceta de los Negocios says Shell is pondering an offer of €23 a share for Repsol, valuing it at £19.3bn. Repsol shares closed yesterday in Madrid at €18.70. Last month, it bought Shell's liquefied petroleum gas operation in Portugal and they are working together in Iran.

Brokers in London treated the report with a fair degree of scepticism and that was reflected in Shell's price, which slipped 2½p to 442¾p. Neither side would comment. Shell is still getting to grips with the fallout from last year's oil reserves fiasco which resulted in more than 20% wiped off its book value and heads rolling in the boardroom.

The new management has set about restructuring the business, including the complicated ownership structure between the Dutch management of Royal Dutch/Shell and that of the UK arm that makes up Shell Transport and Trading. BP slipped 1½p to 506½p following its fourth-quarter trading update.

Takeover speculation lifted Aggregate Industries 26p to 140p. Switzerland's Holcim is considering a bid which would value the building products group at £1.8bn, or 137p a share.

Some big lines of Aggregate were going through on the ticker, including 4.3m shares at 143½p. Dealers said hedge funds were buyers and looking for a higher offer.

Bid speculation also spilled over into rival Hanson, which led the top 100 companies higher with a leap of 19¼p to 481p.

Investors were fighting a rearguard action to keep shares above the 4800 support level but the FTSE 100 index closed 35.1 points lower at 4,783.6.

Shire Pharmaceuticals slid 16 points to 599p despite Morgan Stanley moving it from equalweight to overweight and raising its target from 570p to 680p. The broker was impressed by the recent presentation given by management and has high hopes for the tie-up with River Pharmaceuticals, which should produce new products to replace Adderall XR when it loses patent protection.

It was the first day of trading on the Alternative Investment Market for Dromana Estates, a producer of Australian fine wines, following a placing of 5.45m new shares at 11p. They already enjoy a listing on the Sydney Stock Exchange and opened in London at 13p.

The weaker housing markets may have repercussions for chemicals and paints giant ICI, down 3¼p at 235p. That is the conclusion of US investment bank JP Morgan which has repeated its underweight rating. Margins continue to come under pressure from higher raw materials costs, but cashflow is improving.

United Business Media fell 8p to 511p. Broker Credit Suisse First Boston downgraded it from neutral to underperform after the shares reached its 12-month target price. It says the 9% rally since the start of the year has been driven by the assumption that the company's new chief executive will rationalise the business mix.

JP Morgan does not think there is much left to go for in Liberty International, down 6p at 942½p, either and has decided to downgrade the property developer from overweight to neutral.