Market report: Wednesday close

THE banking sector had City speculators on the ropes today after several days of good gains that had reflected a revival in takeover activity.

News that Royal Bank of Scotland had turned its fire on Charter One Financial in the US with a near-£6bn offer confounded many and put paid to some of the theories they had been spouting.

The move by RBS left its shares nursing a loss of 97p at 1625p with brokers fretting about the latest move by a British bank into the difficult US banking market where dollar weakness counts for a lot.

The bid for Charter One Financial also spiked remaining hopes that RBS would make a move on mortgage lender Abbey National, up 2 1/2p at 464 1/2p.

Only last week there was talk that RBS would team up with 5% shareholder Spain's Banco Santander Central Hispano to bid for Abbey, even though RBS boss Fred Goodwin made it clear his focus was on the US.

Meanwhile, speculators were also taking a profit in internet bank Egg. It ended the day unchanged at 163p. Weekend reports suggested that Egg's 79% shareholder Prudential , 6 1/2p dearer at 456p, had resumed talks with American credit card giant MBNA about selling its stake. The Pru put the stake up for sale earlier this year.

Lloyds TSB slipped 1p to 421 3/4p. A line of 50m shares went through at 422 3/4p as an institution switched from one currency to another.

Other fallers today included Barclays, down 2p to 514 1/4p, HBOS, 10p to 731p, and Bradford & Bingley, 2 3/4p to 282 3/4p.

The rest of the market traded in a narrow range, uninspired by a mixed opening on Wall Street after the Federal Reserve pegged US interest rates at 1%. But the message from the central bank to financial markets was clear - rates are set to rise.

The Bank of England's monetary policy committee will give its verdict on British rates tomorrow and economists reckon dearer money is on the way.

In another day of thin trading, the FTSE 100 index advanced 22.30 to 4569.50.

Retailer GUS rose 2 1/2p to 786 1/2p after broker Dresdner Kleinwort Wasserstein repeated its buy recommendation and raised its 12-month target from 850p to 905p. It reckons the shares should continue to outperform.

But DKW has downgraded Rentokil Initial, down 3 1/4p at 186 3/4p, from hold to reduce and is telling clients to switch into Hays, 1p firmer at 117 1/2p.

The oil price drifted off a 13-year high of $36 a barrel in New York. But broker UBS has tweaked higher its target prices for a number of leading players in the sector. It has lifted Shell, up 6 3/4p at 402 3/4p, from 430p to 455p, BP, 5 3/4p better at 498p, from 445p to 475p, BG, 1/2p dearer at 335 1/2p, by 10p to 305p, and Centrica, 2 1/4p better at 225 1/4p, from 230p to 250p.

Tullow firmed a further 5 1/2p to 102 1/2p following yesterday's share placing and acquisition of Energy Africa, but high-flier Cairn Energy ran into profit taking, down 24p at 1070p.

South London Premiership club Charlton Athletic was one of the performers among smaller cap companies with a rise of 4p to 28 1/2p. A clutch of delayed trades totalling more than 65,000 went through at prices ranging from 26p to 30p.

Richmond Foods rose 15p to 517 1/2p as it celebrated a first interim profit of £2m. The group achieved the surplus on the back of booming ice-cream sales.

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