Market Report: Sainsbury's stake-building fails to lift FTSE 100

It was Independence Day in the US, which always translates into quieter markets in London, and beyond Bradford & Bingley, the City was pretty independent of decent stories or bid chat. There was some interest in J Sainsbury, as the Qatari sovereign wealth fund that failed in its bid to buy it last year upped its stake to 26 per cent. The move brought some vague chat of a renewed bid, but nobody's heart was really in it.

The talk did drive the stock up the leaderboard in the morning, but it weakened in the afternoon to close 0.25p lower at 279.75p. It was a mixed day for the supermarkets as Tesco ended up top of the pile at the close, rising 5.18 per cent to 359.2p.

If that covered the good and the bad, the ugly came from Marks & Spencer. The retailer, which had plunged after announcing a shock profits warning this week, fell further after it was downgraded to "sell" by one of its house brokers. M&S ended down 3.81 per cent at 227p on the Citigroup rep-ort, titled "Every Rose has its thorn". The US broker said the move reflected "our view that the current sharply deteriorating UK macro environment should drive a 'sell' stance on the UK general retailers". The broker has rated 10 stocks in the sector at a "sell" and three as a "buy". The dire retail sales from John Lewis – down for the seventh time in eight weeks – didn't help.

The market-moving story in the morning was Bradford & Bingley after TPG Capital's shock decision to pull out of investing £179m in the wake of a Moody's credit rating downgrade. The move did not scupper the B&B board's plan to raise equity, as investors stepped in to back the rights issue at 55p, but the shares plunged 18 per cent to 50p.

B&B dragged down the rest of the banks and related financial stocks. Barclays fell 4.45 per cent to 279p and Alliance & Leicester, which suffered further after Société Générale cut its 12-month targets, gave up 12 per cent to 255.5p. The French broker has the stock on a "sell" rating with a 230p price target.

Insurers were also hit hard. The sector was not helped by reports that Friends Provident had been unable to sell its Lombard business after Swiss Life, the last bidder, pulled out. It closed bottom of the blue chips yesterday, down 6.9 per cent to 94.5p. Legal & General retreated 4.83 percent to 94.5p.

There was precious little news moving and shaking the market yesterday, partly driven by the lack of economic data and, B&B aside, the lack of significant corporate news. Traders were moaning: "It has been really dull. There's nothing going on, and then there's Independence Day and we're going into the weekend, which doubles it." The market gave back the previous day's gains, led down by the banks. The FTSE 100 closed down more than 1 per cent at 5,412.8.

Oil was a driving force on the market again, with the oil price hovering around $146. Big oil was up in the morning, as were the exploration and production companies after they received a boost from a bullish report released by Exane BNP Paribas. Those whose businesses are affected by the rising cost of oil, such as British Airways, slipped lower. BA closed down 5.74 per cent at 197.8p.

On the mid tier, Southern Cross Healthcare's week just got worse as investors continued to hammer the stock after its profits warning earlier in the week. It spent much of the morning at the bottom of the pile, but was overtaken by B&B at the end of the day. It closed down 14.52 per cent at 80.75p. Another of the week's dogs, Taylor Wimpey, which failed to raise emergency funding this week, also continued to suffer, falling a further 9.29 per cent to 31.75p.

On the upside, beyond Wimpey, the other housing and housing-related stocks were up, topped by estate agent group Savills, which rose 3.31 per cent to 218.25p, followed by housebuilder Persimmon, up 3.06 per cent to 236p. One market maker said: "People might be beginning to think the stocks have fallen too far. There is probably some lift from people closing their short positions as well."

Another riser was the haulage group Wincanton after it confirmed it would not challenge Laxey Partner's bid for rival TDG. It motored up 1.37 per cent to 296p. In the wider market, Sepura rebounded heavily after the previous week's sell-off, closing up 33.64 per cent to 73.5p.

Reminiscent of "that" scene in Marathon Man, AIM hosted another dental horror show yesterday. 1st Dental Laboratories was the worst performer in the morning after it announced a profit warning for its first-half results, citing business disruptions. This prompted Seymour Pierce to cut its rating from "buy" to "outperform". The shares closed down 23.94 per cent at 6.75p.

The vehicle trackers Minorplanet Systems plunged 16.13 per cent to 26p after talks with an unnamed third party collapsed.