Market Report: Boots slips after Dresdner prescribes a 'sell'

The merger between the pharmaceutical retailers Boots and Alliance UniChem is due to complete on 31 July, and shares of both have been strong in the past couple of months as investors have high hopes for the enlarged group. However, not everyone agrees and the broker Dresdner Kleinwort reiterated its "sell" advice on Boots yesterday with a price target of 690p, sending the stock 12p lower to 754p.

Dresdner believes investors are ignoring increasing competition in the sector and new regulations that make it easier for pharmacy businesses to open. The broker points to research suggesting customers usually go to the nearest pharmacy, and as most Boots stores are in town centres, the group is likely to face increasing competition for prescription business. The bearish note not surprisingly also led to a bout of selling in Alliance UniChem, 20p weaker at 995p.

Mining issues were particularly weak after a period of recovering confidence in the industry and better newsflow. Lonmin was hardest hit, shedding 129p to close at 2,758p, while the sector giants Rio Tinto, down 81p at 2,817p, and BHP Billiton, 33p worse at 1,026p, were not far behind.

Hardly a day goes by without a rumour about a bid in the online gambling sector. With PartyGaming still thought to be raising £500m through a bond issue, most traders believe a round of consolidation is imminent. However, the talk yesterday was that Rank, itself thought to be a target for Ladbrokes once it sells the Hard Rock Cafe restaurant chain, is lining up an offer for 888 Holdings, the UK's second-largest online casino operator. Shares in 888 rallied 12p in early deals to 225p before profit-taking saw them close at 212.75p, 0.25p weaker. Ladbrokes continued to slide on the Rank rumours, 9.25p weaker at 395.25p, while Rank fell 4p to 200p.

Winners were hard to find in the FTSE 100 as New York traders returned to their desks after the 4 July holiday and sold stocks on the back of growing concern over missile tests in North Korea. The Dow fell 90 points in early trade and London shares were lower all session. The FTSE 100 closed 56.8 worse at 5,826.7.

Support for Alliance & Leicester evaporated early yesterday morning after its French suitor, Crédit Agricole, confirmed it would not bid for the company, sending the shares 80p lower by midday before a brief rally saw the stock close 65p weaker at 1,084p. Several brokers, including Dresdner Kleinwort, made bearish noises about the mortgage banking group and traders do not expect any new offers for the company. The rivals Bradford & Bingley and Northern Rock, both of which are thought to be bid targets, were also out of favour on the news, falling 12p to 461p and 9p to 1,031p respectively.

RHM, the baking group, was sharply lower after the former owners, the private-equity group Doughty Hanson, began a bookbuilding process to sell the remains of its 26.6 per cent stake in the company - some 93 million shares. Food producers have been out of favour with the market in 2006, after damaging profits warnings, and some traders said the bookrunner Credit Suisse was having difficulty getting the shares placed with new investors. With the placing hanging over the market, RHM found few buyers and fell 16.75p to close at 268p.

In the small caps, there was more good support for the Sharia-compliant finance group CCH International. The group reported excellent full-year figures two weeks ago, and the shares quadrupled to more than 21p. Since then, traders have taken some profits ut enough traders believe this niche market will continue to deliver strong growth. The shares added 2p to 18p.

The restaurant group Tasty had a stellar second day of dealing after the group floated at 52p on Tuesday. Traders are backing the entrepreneurial skills of the Kaye family, the brains behind the Zizi's and ASK restaurant chains, to repeat the trick with Tasty's chain of dim sum eateries. Market makers said it was "not a proper trading stock" because of a very small free float, with more than 90 per cent of the shares owned by the founders. The shares closed 28.5p better at 110p, a 111.5 per cent improvement in two days.

Some traders were caught on the hop by confirmation of a bid for D1 Oils, after rumours circulated the market on Tuesday that a mystery suitor was building a stake in the group, as an announcement was not expected until later in the summer. The shares leapt 28.5p to 304.5p, although the company said talks were at a very preliminary stage and may not result in a full bid. The word in the market is that even if it is only a stake in the company that is on offer, it is likely to be bought at a substantially higher level than the current price.