Market Report: Ban on smoking could damage Rank's health

Investors may have been slightly disappointed by the amount Rank Group raised from the sale of its Hard Rock Café chain, but if Deutsche Bank has it right things could go from bad to worse.

Once the sale of Hard Rock is completed, Rank will be a pure gambling group focused on casinos and bingo. And therein lies the problem as far as Deutsche Bank is concerned. Once the smoking ban comes into place in England next year, the broker believes that Rank will find it harder to compete with other gaming sources, a theory backed by current difficult bingo trading in Scotland. Far from being a takeover candidate, as has been speculated in the market, Deutsche Bank now believes that the shares are an outright "sell" and it cut its price target to 210p. The shares fell 10.5p to close at 232.75p, 15 per cent lower than prior to the Hard Rock sale.

In large caps, a bullish update on Whitbread from broker Merrill Lynch helped the shares to add 7p to 1,607p ahead of today's trading statement. The company is widely tipped to get a bid from a private equity group but traders believe that a move before the end of the year is unlikely. Merrill is hoping for a strong statement tomorrow and upped its price target to 1,800p along with a "buy" recommendation.

ICI, up another 12p to 435.5p, has sneaked under many radars to become one of the best performers of the year in the blue chip index. The stock has gained more than 30 per cent since last December. The shares could have a lot further to go if rumours about a bid for the company turn out to have any substance. Traders said that since the company sold its Quest subsidiary last month for £1.2bn, wiping out its debt, it has become more attractive to private equity investors.

In the wider market, the market was dragged down by another weak session for oil majors BP and Shell, down 4p to 580.5p and 21p to 1,803p respectively, to post a marginally negative close to trading for the blue chips. Demand for telecoms stocks, with BT Group up 4.5p to 295.75p and Vodafone closing on a new high for the year of 141p, 2.75p better, was not enough to drag the index into the red. The FTSE 100 closed 3.4 worse at 6,156.4.

Henderson Group, the fund manager, was in demand on the back of a Citigroup research note published on Monday. The company recently won a bidding battle to take control of support services and construction group John Laing, prompting Citigroup to recommend the stock as a "buy" and giving the shares a 150p price target. Henderson closed up 3.5p at 135p.

Private equity group 3i finally made its formal £940m bid for Countrywide, the estate agency. However, the biggest mover on the back of that story was Rightmove, the online property site in which Countrywide has a 20 per cent stake. Countrywide shareholders will be offered 490p in cash plus 0.16518 shares in Rightmove as part of the deal. Rightmove shed 22p to 345p, while Countrywide closed 1.75p worse at 523p.

Talk that US consumer goods giant Procter & Gamble will bid for SSL International, the condom to foot powder group, has intensified in the past couple of weeks. Most traders are not expecting a move before Christmas, but the shares closed another 3.25p better at 372p, a new four-year high.

Peter Hambro Mining was sharply lower on more rumours about Russian licensing problems. Officials have threatened to revoke five of 48 Peter Hambro licences in Amur. The shares fell 154p to close at 822p.

A late profit warning on Monday evening from Harry Potter publisher Bloomsbury sent investors diving for cover. Brokers Altium Securities cut its rating to "sell", saying that the profit warning was "staggeringly poor". The shares tanked 90p to close at 220p.

Any investors who sold out of Armour Group, the consumer electronics supplier, after a mild profit warning in the summer, will have been kicking themselves. The shares, which traded as low as 31p in late August, fell by a quarter of a penny to 46.25p yesterday, but rebounded nicely as the company confirmed that it expects full-year results to be ahead of expectations.

Premier Management shareholders will be hoping that they have hit the jackpot. The shares were up strongly, 0.33p better to 1.21p before the stock was suspended in early afternoon as the company confirmed that it is in reverse takeover talks. Market makers were in the dark as to the identity of the potential bidder.