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View the article online at http://citywire.co.uk/wealth-manager/article/a245677

Friday Lunchtime Market: taxing times

by Patrick Sherwen on Jan 31, 2003 at 18:39

There is little news to warm investors' hearts as the economic storm clouds gather and Tony Blair prepares for war talks with President Bush.

Shortly after 1pm the FTSE 100 had clawed back some ground but was still 31 points down at 3,547 while the techMARK was still a chilly 9 points down at 610.

Yesterday's news that the US economy grew by just 0.7% in the last quarter weighed heavy on investors' minds, especially as the National Institute for Economic and Social Research cut its forecast for economic growth in the UK from 2.5% to 2.2%. The revision by the respected think tank adds to the pressure on the chancellor who forecast growth of 2.5-3% this year in his pre-Budget report. Gordon Brown may need to raise taxes further as a result, it is feared.

Morrisons (MRW), down 5p to 164.5p, attempted to provide a distraction as it set the clock ticking in its bid for Safeway by posting its offer document to shareholders. Safeway (SFW), down 2.75p to 313.25p, now has 14 days to issue a formal response while Morrisons has 60 days to pull a deal together, although a rival bidder such as Philip Green is likely to trump the offer.

Telecoms and techs are weak in the wake of Nasdaq's 36-point loss last night.

Sage (SGE) sagged 6.75p to 119p, BT (BT.A) dropped 4.75p to 165.75p, Vodafone (VOD) slipped 3p to 107p, mmO2 (OOM) dipped a penny at 45.75p and Misys (MSY) fell 7.5p to 175.5p.

Positive broker reaction to yesterday's results enhanced Rio Tinto (RIO) by 8p to £11.28 and gave collateral support to Xstrata (XTA), up 2.5p to 532.5p.

Defensives British American Tobacco (BATS), up 3p to 568p, and Scottish Power (SPW), up 3.25p to 346p, benefited from this morning's bear run.

Pharmaceuticals are solid with positive press comment boosting GlaxoSmithKline (GSK) by 19p to £11.34 and broker downgrades having little impact on AstraZeneca (AZN), up 4p to £20.82.

Positive broker comment enhanced BAA (BAA) by 7.5p to 449.5p and Hays (HAS) by 1.25p to 77.25p.

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