Market report: Wednesday close

THE FTSE 100 topped 5000 points for the first time since June 2002 in early afternoon trade, but fell back as investors lost their nerve, despite receiving a boost from confirmation of the proposed £1bn bid for

Music publisher EMI regained some of its composure, rallying 3¼p to 240p following this week's profits warning. US securities house Morgan Stanley has repeated its underweight stance on the shares and dropped its target price from 246p to 225p. Rival ABN Amro says hold the shares but has reduced its target from 260p to 240p.

Morgan Stanley has also been taking a look at the mining sector. The broker raised Xstrata, up 4p at 1030½p, from equalweight to overweight but moved Rio Tinto, off 29p at 1621p, in the opposite direction. If Xstrata's bid for Australia's WMC does not proceed, Morgan Stanley thinks there are other value-raising opportunities to be had in the shares.

News that Euronext, the operator of the Brussels, Amsterdam, Paris and Lisbon bourses, is ready to table a bid for the London Stock Exchange lifted the latter 7p to 572p. Curious, then, that the LSE's fourth-biggest shareholder, Fidelity, has been 'aggressively' reducing its holding, raising fears the Euronext or Deutsche Borse bids may not succeed. Since 25 January, Fidelity has sold 3.76m LSE shares at between 560p and 580p, cutting its holding from 6.75% to some 5%.

Other brokers say there is probably not much more than 20p upside in the LSE share price now but plenty of scope for downside due to regulatory worries and the reluctance of Euronext and Deutsche Borse to pay over the odds.

BP rose 2p to 549p as brokers continued to reflect on yesterday's bumper profits and dividend. US investment bank JP Morgan thinks the shares may have run their course for the time being and has downgraded them from overweight to neutral while trimming its target from 600p to 580p.

It remains bullish about long-term volume growth but reckons much of this will come from its joint venture in Russia. The bank is less excited about growth prospects elsewhere.

Kesa Electricals slipped 8¾p to 328p after UBS downgraded from buy to neutral while Woolworths added 1p to 49p, having rejected an offer of between 50p and 55p from venture capitalist Apex Partners.

Oil exploration minnow Faroe Petroleum rose another 2½p to 88½p and has now put on about a third since the beginning of November.

The group has bought a 90% stake in two part blocks, 14/21 and 14/22, in the UK Central North Sea from Shell and Esso Exploration. Faroe's share price has been driven higher by its involvement in acreage close to ChevronTexaco's bumper oil discovery just west of the Shetland Islands.

Alternative Investment Market-listed marketing services provider P&MM, up 12p at 76½p, made the most of bumper trading conditions in the second half of last year.

Chairman Colin Lloyd now expects profits for the year to 31 December to exceed expectations. It has also bought performance improvement agency AYM for £682,000.