WPP rises above FTSE doldrums

WPP, the world's second largest advertising group, was one of a few blue chips stocks to buck the weak market trend yesterday after its corporate broker turned positive ahead of tomorrow's full year figures.

While the FTSE 100 fell below the 5,000 level, WPP shares closed 4p higher at 584p after Panmure Gordon upgraded them to buy and lifted its target price to 670p from 590p.

"We expect a positive outlook for both revenues [recent new business wins] and margins [smooth integration of Grey Global]. We also see scope for increasing cash returns," Panmure's media analyst Jonathan Helliwell said.

At current levels, Mr Helliwell reckons WPP offers good "blue chip" growth prospects at a reasonable valuation.

Leading shares closed sharply lower unsettled by Wall Street's poor overnight performance and fears of a rate rise in the UK after it emerged that one member of the Bank of England's monetary policy committee had voted for a rise at its last meeting.

Several heavyweight stocks trading ex-dividend - Barclays, down 22p to 583p, Standard Chartered, off 26.5p to 971.5p, Scottish & Southern Energy, 21p lighter at 870p, and Rio Tinto, 13p cheaper at £17.66 among them - added further downside pressure.

The final scores showed the FTSE 100 down 44.4 points at 4988.5, taking its losses over the past two sessions to 72 points - its biggest two-day fall since early August. Elsewhere the FTSE 250 fell 19.8 points to 7175.4, while the FTSE Small Cap index shed 24.7 points to finish at 2920.5. Market turnover was no more than average with about 2.8bn shares changing hands. Oil shares were among the most active with BP, 4p cheaper at 556.5p, and Shell, 9p weaker at 484.25p.

In the bond market, the benchmark 10-year gilt closed around 101.730, yielding 4.772%.

Back among the blue chips Next gained 7p to £15.77 despite talk that the retailer has cut womenswear prices by an average of 3% to stimulate sales. However the word in the Square Mile yesterday was that the move had failed.

Dixons closed 2p lower at 161.75p despite buying back 2.35m shares for cancellation. Dealers pinned the weakness on a downgrade from UBS. Moving to neutral from buy, the Swiss broker expressed concerns that the company could issue a weak pre-close trading update at the end of April. Given recent cautious comments from Kingfisher, off 0.25p at 293p, and weak sales figures from John Lewis, dealers reckon there is a good chance the update will disappoint.

Among the mid caps, Isoft, the healthcare software company, was one of the top performers after ABN Amro encouraged clients to buy following a meeting with management.

The Dutch broker reckons Isoft is one of the cheapest stocks in the sector and believes the company will have selected a new finance director by the end of April. On that topic, City traders believe the company, which has been dogged by accounting concerns, is about to announce a new auditor. They also hear Morgan Stanley, one of Isoft's new corporate brokers, is set to start coverage with a bullish research report and take the company to the US to meet several large mutual funds.

Oil exploration group Burren Energy was another strong performer, rising 11p to 525p on reports the Indian Oil Corporation is in exclusive talks to buy Maurel & Prom - Burren's French partner in the Congo.

"If we were to allocate 90% of M&P's $2.8bn (£1.5bn) market value on the Congo this would give a see through valuation of $1.5bn, or 549p per share, for Burren's interest in the [Congo] assets," said Tony Alves, at stockbroker KBC Peel Hunt.

On the downside, Paragon Group, the specialist mortgage lender, dropped 25.5p to 402p in delayed reaction to Tuesday's warning from Bradford & Bingley, down 3.75p at 325.75p, that arrears in its buy-to-let portfolio had jumped 60% in 2004.

Weir, the Scottish pumps group, was also in the doldrums after Merrill Lynch restarted coverage with a sell rating, arguing that the shares, which have gained 12.5% over the past three months, are overvalued. They ended yesterday's session 7.75p lower at 324.75p.

In the smaller companies world, biotech group Oxford Biomedica gained 1p to 20p on hopes that trial results for its cancer vaccine Trovax in colorectal cancer will impress and pave the way for a licensing deal with a large drug company. Oxford Biomedica recently terminated takeover talks with a mystery bidder.

Aberdeen Asset Management was under pressure again. Its shares, 125p a week ago, fell a further 2p to 114p. Dealers reckon the fall has been caused by Deutsche Asset Management selling stock to meet client redemptions.

Minorplanet Systems, the vehicle information specialist, slumped 1.87p, or 24%, to 5.87p after warning that it continued to experience a "challenging cash liquidity situation" and was in discussions with a number of parties to secure additional working capital. The company also revealed that it is open to offers.

Eidos back in the game

Computer games developer Eidos bounced back from Tuesday's 11% fall yesterday on rumours that it could be a takeover target for Rupert Murdoch's News Corp.

The shares jumped 3.5p to 60.25p after the GamesIndustry.biz website claimed a deal was imminent. Unfortunately for long-suffering Eidos shareholders, News Corp said there was no truth in the story.

Nonetheless, there is some logic in the idea of a large media group like News Corp acquiring a computer games company. Indeed, Peter Chernin, News Corp's chief operating officer, told a conference last month that the computer games industry, which is now bigger than the film industry, needs to be taken seriously.

That, however, will be no consolation for Eidos shareholders who have now waited eight months for an offer to materialise.