Short shrift for Alliance & Leicester

Short Alliance & Leicester - that was the simple message to hedge funds from leading investment bank CSFB yesterday.

The Swiss broker reckons the mortgage bank's half-year trading statement, due on June 17, will disappoint. In an aggressive research report, analyst Jonathan Pierce said he expected the update to highlight a material decline in margins.

Mr Pierce claims this is in part due to the costs of writing a significant amount of new mortgage business. As such, he believes full-year profit forecasts will have to be reduced.

"We believe the big fall in margin will worry investors and advise long funds to trim their holdings and hedge funds to short into the pre-close statement," he said.

Despite buying 160,000 shares for cancellation, A&L still closed 3.5p lower at 823p.

In the wider market, leading shares bounced back after hitting the 4,400 level early in the session. Aided by Opec's plans to boost production and a re covery on Wall Street, the FTSE 100 finished the day 12.6 points higher at 4,435.4. Centrica, up 6.5p to 218p, was the biggest riser after announcing plans to cut 850 jobs.

The FTSE 250 slipped 5.3 points to 6,044.9, while the FTSE Small Cap index eased 3.1 points to 2,499.4. Market turnover was 2.7bn shares.

In the bond market, gilts recouped some of their early losses on the back of weaker than expected service sector data - but still ended the day lower as investors waited for today's employment figures from the United States. The benchmark 10-year gilt closed at 98.430, yielding 5.205%.

SABMiller was the day's second best blue chip gainer after the company decided to withdraw from the bidding for China's fourth largest brewer, Harbin. SAB was also lifted by news that its broker, Cazenove, had lifted its recommendation to buy from hold.

"Our upgrade is based on the simple premise that, on our new forecasts, SAB should deliver 10% [growth] in earnings per share between 2005-2007, the fastest rate of any European brewer. Yet its valuation is clearly the lowest," analyst Sandy Soames said. SAB rose 18p to 670p.

Elsewhere, BSkyB, down a further 11.5p to 584.5p, remained in the doldrums. According to one senior market man, a number of institutions are starting to wonder just how defensive the satellite broadcaster would be in an economic downturn.

"How many punters are going to pay £400 a year for Sky if interest rates go up another three or four times?" one said.

Vodafone eased 1.25p to 125p after Deutsche Bank removed the stock from its influential Focus List of recommended stocks.

The German broker does not think Vodafone will perform well in the current market environment and believes newsflow from two of its biggest markets, Britain and Japan, will remain negative.

Elsewhere, BG Group, which ended 6.25p higher at 349p, continued to draw support from Wednesday's bullish note from JP Morgan.

Away from the blue chips, Big Food Group - the owner of the Iceland frozen food chain - was one of the top FTSE 250 performers. Its shares rose 5.25p to 106.25p, helped by Wednesday's share purchases by three directors and talk that some of the company's shareholders, who include Icelandic retail group Baugur and Barclays, are demanding change after a dreadful start to the year.

Big Food shares have almost halved in the past four months as the company has issued a string of disappointing trading updates that have led some analysts to question its strategy.

The latest update came last week, when the company revealed that turnover at Iceland had fallen by 1.9% in the first six weeks of its new financial year and, more worrying, sales at its revamped outlets were down 0.8%.

Traders reckon institutions could be pushing for the disposal of the Booker cash and carry business, or a sale of the company. It is difficult, however, to think who would be interested in buying all of it.

In the leisure sector, nightclub operator Luminar was marked 13.25p higher at 439p and JD Wetherspoon gained 7p to 293p, excited by news that rival Yates Group, up 21p to 123.5p, was in takeover talks with a private equity group.

On AIM, 3DM Worldwide was one of the biggest losers after investment website T1PS.com claimed the market capitalisation of the loss-making plastic moulding technology company, at £52m, was almost impossible to justify.

T1PS has written to 3DM asking for clarification on a number of issues, the most interesting of which concerns Silkwood Financial Corporation.

As close followers of the company will know, 3DM agreed a $15m (£8m) five-year royalty deal with Silkwood earlier this year.

The company, however, which has yet to file its annual report, has been unable to provide T1PS with a contact name or number for Silkwood.

Elsewhere, Celtic Resources firmed 1.5p to 398p amid talk that an upbeat drilling report from its Suzdal mine in Kazakhstan could be on the way. Shares in NXT, the maker of flat audio speakers, eased 4.5p to 89p as a large line of stock was offered around the market.