Market Report: Ailing Schroders faces drop from FTSE 100

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A half-hearted performance by Schroders yesterday means that shares in the fund management giant are likely to exit the FTSE 100 in tomorrow's reshuffle of the blue chip index. Schroders managed a rise of just 7.5p to 648p, valuing the group at £1.8bn, and it is now virtually certain of being relegated in the latest quarterly review by FTSE of its indices.

In its place will come Cairn Energy, steady at 1,474p, as the oil explorer makes its debut in the top flight after a near-fourfold rise in the company's stock this year. It will take its place alongside rival Shell, which it partly has to thank for the success. Cairn bought control of an oilfield in Rajasthan, India, from Shell in 2002. The amazing success of this asset forms the basis of Cairn's £2.4bn market capitalisation. The group paid Shell just £4m for control of the field.

Hammerson, 3p better at 748p, also has a chance of making it into the FTSE 100, albeit a slight one. The property group will have to put in a strong performance today, the last day of trading before the changes are calculated, while Bradford & Bingley, the building society which for a while has been on the brink of relegation, would need to suffer a hefty drop.

Elsewhere, National Grid Transco fell 2.5p to 464.75p after both Cazenove and JP Morgan downgraded the stock. Cazenove argued that shares in the utility now offer very little upside given their strong performance since the start of the year. The rationale behind JP Morgan's downgrade was much the same. It urged its clients to switch into Scottish Power, 2.25p higher at 409.75p. The FTSE 100 closed 13 points better at 4,563.8 but volumes were low as Wall Street was closed for a public holiday.

Smiths Group put on 4.5p to 716p amid suggestions that the conglomerate could see a jump in demand for its security equipment from the authorities in Russia as a result of the school siege in Beslan, North Ossetia. Smiths is already a major supplier to Russia and brokers believe the government will now be under pressure to show that it is making a concerted effort to improve its counter terrorism efforts. Once the orders filter though, it could leave Smiths' earnings forecasts looking conservative.

Lower down the pecking order, BTG soared 26.5p to 134.75p on rumours that bullish news about Varisolve, its lead product, is imminent. Analysts believe that a positive development for Varisolve would either see the US Food and Drug Administration indicate that it has allowed BTG to continue with Phase II trials of the varicose veins treatment or an announcement that the group has managed to secure a licensing deal for the product. As it stands, the market is not expecting an update from the FDA until November. Varisolve is key to BTG's future, hence talk about the drug's future tends causes volatility in its shares.

Griffin Mining put on 1.25p to 20.25p on whispers that today's results will impress. The group is a China-focused zinc and gold explorer. Word has it Wyndeham Press, down 2p to 110.5p, is close to securing a major deal to publish a soon-to-be launched women's magazine in the US. The publication is said to be targeting a readership of about one million and should Wyndeham win the deal it is likely to have a major impact on profitability. According to the whispers, the contract could be announced as soon as the start of next month.

Finally, JM Finn really got shares in York Pharma moving. The biotech soared 14.5p to 66p as the small cap specialist broker issued a note in which it argued that York's anti-fungal treatment, Abasol, could make the company worth as much as £158m one day. Even after yesterday's share price jump, York is worth just £5.7m. So if JM Finn proves to be correct, the stock should rise a further 2,500 per cent to about 1,600p per share.

The broker predicts that Abasol will be launched as early as 2006 and forecasts it will achieve peak sales of about £150m. The drug, originally developed by the German pharmaceutical giant Bayer, also has the potential to be used in the treatment of a series of other disorders, including acne, which will boost sales further, JM Finn says.

York is led by the biotech entrepreneur Terry Sadler, who once also took the helm of Bioglan Pharma. At its peak, Bioglan was worth more than £200m but in 2001 it collapsed under a heap of debt. Despite JM Finn's optimism, it is worth investors noting that at present York has zero sales and is yet to receive regulatory approval for Abasol. This means that the company is very much in its infancy. Of course the recent jump in York's share price will be welcome at the group, which is known to be on the hunt for acquisitions and is likely to use its shares as currency.

Market Movers

¿ Hays 124p (up 2p, 1.6 per cent). Traders move into the stock ahead of today's full-year results.

¿ AstraZeneca 2,665p (up 39p, 1.5 per cent). Investors expect a decision from the US Food and Drug Administration on the group's Exanta product and they expect it to be good news.

¿ Standard Chartered 975p (up 13.5p, 1.4 per cent). Speculation that the bank is mulling an acquisition excites.

¿ Amlin 151p (up 8.5p, 5.6 per cent). Better-than-expected first-half figures prompt applause from brokers.

¿ DS Smith 148p (up 5.75p, 4.1 per cent). Morgan Stanley upgrades the packaging group to "equalweight" from "underweight".

¿ British Vita 253.25p (up 7.25p, 2.9 per cent). Posts in line first-half profits.

¿ Taylor Nelson 209.25p (up 5.75p, 2.8 per cent). Underlying pre-tax profits rise to £31m from £20m.

¿ Corvus Capital 12p (up 4.5p, 60.0 per cent). Andrew Regan takes a 29.9 per cent stake and becomes chief executive.

¿ Cohen & Co 4.25p (up 0.5p, 13.3 per cent). First-half losses narrow to just £94,000 compared with £717,000 in the year earlier.

¿ Sirdar 40p (up 4.5p, 12.7 per cent). Institutional demand drives the stock higher.

¿ William Hill 530p (down 12.5p, 2.3 per cent). The bookmakers' interims disappoint some in the Square Mile.

¿ Next 1,493p (down 11p, 0.7 per cent). Investors ignore Dresdner Kleinwort Wasserstein upgrade.

¿ Regus 67.5p (down 2.75p, 3.9 per cent). Profit taking after in line first-half figures.

¿ Victoria 227.5p (down 77.5p, 25.4 per cent). Issues a full-year profits warning, blaming what it described as "the general malaise in the UK economy".

¿ Gaskell 12.5p (down 1p, 7.4 per cent). Crashes into the red to the tune of £1.3m at the interim stage compared with a profit of £3.1m last year.

¿ Britannic Group 358p (down 3.5p, 0.9 per cent). Dealers report a slight nervousness ahead of today's first-half results.

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