Market report: Wednesday close

RETAILERS were having a bad time of it today... and this time they couldn't blame the weather.

Shares of the big stores were among some of the biggest fallers as City investors staged their own version of the summer sales.

Among the hardest-hit was GUS, down 27½p at 859p, after failing to issue a timetable for the proposed demerger of its Experian credit rating arm and Argos catalogue shops. It was closely followed by Next, off 50p at 1450p, after going ex the 28p dividend, while supermarkets chain J Sainsbury shed 9½p to 283p after going ex the 5½p payout.

Brokers say there is no doubt trading conditions are worsening on the High Street and that is being reflected in the mood among investors. Other casualties included Dixons, down 7p to 147¾p, Kingfisher, 4½p to 257p, WH Smith, 7p to 345p, and Kesa Electricals, 9p to 265½p on the back of worse-thanexpected profits news.

Share prices generally drifted in thin trading undermined by fresh falls on Wall Street this afternoon. The FTSE 100 index fell 11 points at 4971.5.

National Grid Transco firmed 1¼p to 5345p. ING has lifted its 12-month target from 517p to 580p and is telling clients it is a buy. Kelda, the Yorkshire Water group, used to complain of too little rain and tell its customers to share baths. Now its US operations are complaining of too much and its American customers, who like their lawns the right shade of green, have been turning off their sprinkler systems after a wetter than normal year.

However, that did not hold back profits, up 16% at £223m, in the year to 31 March. A bigger rise in the dividend, up 8% at 29p, sent Kelda shares 5½p higher to a record 640¼p.

Investors continue to take more than a passing interest in the drinks sector on the back of possible rival bids for Allied Domecq, ½p better at 694½p, from Pernod Ricard of France and American wine distributor Constellation Brands. Broker Charles Stanley reckons the disruption caused would benefit rivals such as Diageo, the world's biggest drinks distributor, which owns Guinness, Smirnoff vodka and Johnnie Walker scotch.

US broker Lehman Brothers has repeated its outperform rating on Diageo, down 5½p at 799p, buoyed by a strong US spirits market. Lehman is confident Diageo will benefit from consolidation within the industry because of its focus on growing market share.

There was heavy turnover in Legal & General, 1¼p cheaper at 109¾p, and Friends Provident, ½p cheaper at 173½p. Two lines in L&G totalling 66m shares went through at 111½p, while Friends Provident saw two lines for 26m go through at 173p alongside a 19m batch at the same price.

UBS has downgraded Hays, down 1¾p at 124½p, from buy to neutral while reducing its 12-month target from 160p to 138p. The broker says the premium rating is justified but makes a further rally unlikely.

Sage boss Michael Jackson says his latest vehicle Computer Software, up 1½p at 55p, expects to produce pre-tax profits for the full year of £2m, up from £600,000 last time.

Mortgage lender Paragon rose 36½p to 404p after launching its first share buyback and lifting the half-year divi 33% in a £26m windfall for investors. Pre-tax profits rose 9% to £36.1m in the six months to March, despite lending for buy-to-let mortgages falling £160m to £637m.