Market Report: Boots polished as it ends an era at all-time high

Monday sees the end of an era for British retail and the London markets - Boots ends 56 years as an independent listed company when the merger with Alliance Unichem takes effect. Both stocks ended their separate lives on a high as brokers warmed to prospects for the combined group, which begins trading as Alliance Boots on Monday.

Despite yesterday being the last day the two companies traded individually, Monday brings a trading update from Boots and first-half results from Alliance Unichem. Even though many market observers believe many of the expected synergies are already in the price, Alliance is expected to report a 13 per cent rise in pre-tax profits on Monday, and both companies were well bid. Boots closed 34p better at 806.5p, an all-time high, a feat matched by Alliance Unichem, 42p firmer at 1,068p.

The FTSE 100 closed another 45.4 firmer at 5,974.9, ending the index's best week of the year, as another batch of strong results and positive hopes on US interest rates sent the Dow Jones sharply higher in early deals. London shares were boosted by a strong performance in mining, as Inco did Xstrata a big favour by bowing out of the bidding battle for Falconbridge. Xstrata added 160p to close at 2,301p, before results next week. Anglo American, also expected to report record results next week, attracted buying support and closed 39p better at 2,260p.

The cruise operator Carnival was well bid, 20p better at 2,159p, as American rival Royal Caribbean reported better-than-expected results. Even so, shares in Carnival remain among the worst performers in the blue-chip index, more than 36 per cent below the high for the year. Traders said the shares are unlikely to test the highs again this year.

Disappointing results from the insurance giant Prudential dented the rest of the sector, even if most of the Pru's woes are down to its online banking arm Egg. Shareholders of Aviva must be breathing a sigh of relief: in March the UK's largest insurer offered 708p per share for Prudential, 18.4 per cent more than the 577.5p the shares closed at yesterday. Aviva closed 3p worse at 724.5p, while Old Mutual was unchanged at 164p.

A late surge of activity in the electricity group Veridian was based on takeover speculation, with a number of private equity groups thought to be mulling an offer for the Ulster-based group. The shares gained 38.5p to close at 1,038p. Inmarsat, the satellite business that reports debut full-year numbers next Friday, was sharply weaker after Morgan Stanley downgraded forecasts and reduced its target price to 350p. Two of Inmarsat's major customers, Telenor Satellite and Stratos, made negative comments about Inmarsat's second-quarter sales last week. According to the broker, the two companies account for about 70 per cent of Inmarsat's business between them. The shares lost 16.75p to close at 313.25p.

It looks like the market is no longer convinced The Carlyle Group will bid for Amec, as the shares gave back 11p of its recent gains to close at 284.25p. One private equity source said Amec is likely to have appeared "on the radar" at most private equity investment houses and that "if they were interested it would have happened by now".

Traders are betting that Icelandic investor Baugur could formally launch a bid for House of Fraser next week, almost two months after the fashion retailer confirmed a £351m approach valuing the shares at 148p. Some traders had been hoping for a better price, so volume was weak and the share price remained unchanged at 140p.

The word in the market is that BP is preparing to launch a 350p-per-share bid for D1 Oils, a month after the company confirmed it is in talks that may lead to an offer being made. The price spiked to more than 300p a share when the announcement was made but since then the shares have suffered from a bout of profit-taking. They closed 6.25p better yesterday at 251.25p.

A bullish note from Oriel Securities followed an upbeat AGM statement from Kingston Communications, in which the Hull-based group announced a 50 per cent rise in broadband customers. The broker highlighted the group's 8.7 per cent free cashflow yield and an undemanding price-to-earnings ratio of just 11 times. Shares in Kingston added 1.75p to close at 55.5p.

Small-cap traders will be on the lookout for the market debut of Napo Pharmaceuticals, which announced its intention to float on the main market on Monday. The group hopes to raise £12m of new funds through a placing organised by Nomura at 83p.