Market report: Wednesday close

HOPES that the index-tracking funds and stock market bulls would get together and extend yesterday's rally proved shortlived.

Trackers were initially galvanised by the latest reshuffle of US security house Morgan Stanley's quarterly review of its Capital Index (MSCI), which saw the inclusion of a number of the bigger second-line companies.

They included Punch Taverns, 2 1/2p stronger at 472p, Marconi, unchanged at 550p, Trinity Mirror, 10p dearer at 618 1/2p, Icap, 2 3/4p higher at 269 1/4p, and international motor trader Inchcape, 41p better at 1541p.

Tracker funds invest in those companies that make up the various indices and monitor the performance of the market, such as the FTSE 100. They are required to buy a specified weighting in each company that joins the MSCI, or any other index, which helps to drive up the values of those shares.

But the best efforts of the trackers were not enough to give leading shares a further boost as they ran into investors eager to take a profit in the wake of yesterday's gains.

The FTSE 100 index also had to contend with a long list of companies going ex the dividend, equivalent to a seven-point deficit. In the event, it fell 41.80 points to 4412.90, undermined by the latest inflation news.

Shire Pharmaceuticals fell 4p to 508p after broker Merrill Lynch added the shares to its 'Europe 1 List' and set a target of 640p. It is forecasting profits growth of 30% next year.

Meanwhile, rival GlaxoSmithKline fell 15p to 1167p amid fears it may lose its court battle over the import of cheap generic drugs into Canada.

Oil shares gave back some of yesterday's lead despite the price of crude rising above $40 a barrel on the futures market, where it touched $40.19. BP slipped 4p to 486 1/2p with sector experts claiming the price rise may have run its course.

British Airways dipped 10 1/2p to 253p following the decision to raise the price of its return tickets by £5 because of the sharp rise in the oil price on world markets.

This has, in turn, jacked-up the price of BA's fuel bill, which runs into hundreds of millions of pounds annually.

Discount rivals easyJet, down 3/4p at 219 1/2p, and Ryanair, 14 cents cheaper at e4.43, have ruled out a rise.

It was the first day of dealings on Aim for American company Solar Integrated Technologies, following a placing at 171p by broker KBC Peel Hunt to raise £12.3m. It touched 194 1/2p before settling at 185 1/2p. SIT makes photovoltaic roofing systems and has an order book worth $74m (£42m).

Star Energy also made its debut on Aim following a placing of shares by broker Hoare Govett at 175p, raising £79m. The oil and gas exploration traded at 183 1/2p.

Fund manager HHG firmed 1 1/2p to 43 1/2p after a line of 10m shares went through at 42p.

Hotelier Hilton slipped 1 3/4p to 237 3/4p after broker ABN Amro raised its target from 265p to 300p based on hopes of recovery in its core hotels business and continued strong growth at its Ladbrokes betting chain.

Advertising giant WPP slipped 7p to 543p despite winning a major contract from HSBC worth £600m. Merrill Lynch has repeated its buy recommendation.

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