Market Report: Holiday market wakes up for HSBC and Pearson

It seemed that market-makers had finally packed their bags for the summer yesterday, after a quiet day's trading which was only enlivened by two sets of dazzling corporate interim results.

Just 600 million shares changed hands across the market and Footsie failed to hold ground the other side of the 4,900 mark that it reached in early trading. It closed 3.6 points down at 4895.7, having touched 4,907.2 at one stage.

Pearson and HSBC Holdings stole most of the limelight, as both impressed with better- than-expected interim profits. Pearson climbed 26.5p after the company's chief executive, Marjorie Scardino, pledged to double its pounds 4bn value within five years.

HSBC added as much as 120p at one time in the day, but the initial excitement wore off towards the close of play and it finished 44.5p better at pounds 22.38.

A handful of financial stocks were dragged along in HSBC's wake. NatWest - which reports results today - climbed 10.5p to 870, and Standard Chartered improved 8.5p to close at pounds 10.01.

But investors seemed to be heeding analysts' warnings that banks could be in line for a sharp correction, as others in the sector were not looking so flush.

Bank of Scotland was among the top Footsie fallers, shedding 15p to 430p. Abbey National also closed 15p poorer at 834.5p, after a feeling in the market that its results last week had not matched up to those of Lloyds and HSBC. Declines in banking stocks in the US and Europe had also unnerved the financial sector, analysts said.

Among other blue chips, Bass added 8p to 842.5p despite JD Wetherspoon's decision to ban alcopops. ICI firmed 5p to pounds 10.20 on reports that a $400m joint venture in Shanghai had been approved. And despite a bearish note from Societe Generale, Rolls-Royce edged up 1p to 237p.

The biggest Footsie loser by far was British Airways, which plummeted by 30p to 610p after the company revealed that strikes by cabin crew would cost pounds 125m in the first half of the year.

Pharmaceuticals, which have been up and down like a yo-yo in recent weeks, were back in the doldrums again after negative press comment over the weekend. Cortecs International ended 11p poorer at 151.5p after reports that a competitor was developing a rival drug for osteoporosis. And despite Zeneca's announcement that its schizophrenia drug, Seroquel, had been approved, the company eased 16.5p to pounds 20.02p.

Two drugs minnows did buck the sector's downward trend, though. Shire Pharmaceuticals jumped 8p to 249.5p on news of its pounds 113m acquisition of the US-based Richwood Pharmaceutical Company, and Oxford Molecular firmed 3.5p after its interim results pleasantly surprised analysts.

Water stocks were also on the slide yesterday, as traders continued to fret about the Government's decision at the end of last week to refer PacifiCorp's bid for Energy Group to the Monopolies and Mergers Commission. A bearish note from HSBC James Capel did not help matters, and analysts said investors were taking profits after a good run for the sector. Thames Water finished 9p off at 776.5p; Wessex Water dropped 16.5p to 462.5p; and Anglian Water joined the slippery slope, shedding 19.5p to 771.5p.

Among the second-liners, Telewest Communications was one of the best performers, after confirmation that it was in preliminary merger talks with NTL, the US cable company. Telewest added 4p to 83p.

While Telewest was on the rise, Flextech, the cable and satellite programme supplier, was floundering after a press report that its chief executive, Roger Luard, was to leave the company. Flextech issued a statement denying the story, but it nevertheless ended 17p poorer at 636p.

Investors were also keen on Amersham International, which is shortly to announce the completion of the fusion of its biotechnology division with Pharmacia & Upjohn. The company has also increased its clout recently with the pounds 1.8bn merger with Norway's Nyco-med. Amersham rose 57.5p to pounds 19.82.

Elsewhere, a sharp increase in pre-tax profits at Filtronic Comtek sent shares soaring 19p to 394p, buoyed by optimistic noises from Kleinwort Benson, Merrill Lynch, and its own house broker, Panmure Gordon. And an "add" note from NatWest nudged More Group up 2p to 593.5p.

Viglen, the personal computer company spun off from Amstrad, made its debut yesterday, placed at 72.5p. But it lost ground during the day, and closed 8p down at 64.5p.