Market Report: ITV picture gets brighter amid general gloom

ITV was one of the few bright lights in an otherwise gloomy London stock market yesterday. The country's biggest commercial broadcaster rose a further 2.75p to 104.25p amid mounting speculation that Charles Allen, its under-pressure chief executive, will announce his departure next week.

Potential private equity bidders are said to be circling, with Merrill Lynch rumoured to mulling a bid in conjunction with Roger Parry, the chairman of Johnston Press. Under Takeover Panel rules, Mr Parry must wait until October before making any fresh move.

Members of the consortium fronted by former BBC director general Greg Dyke that failed to buy ITV earlier this year are also said to be interested in taking another tilt at the broadcaster.

Meanwhile, a surprise increase in the cost of borrowing cast a shadow over the property market and deepened the gloom permeating the City.

The FTSE 100, already unsettled by disappointing results from ICI and Unilever, fell 93.7 points to 5,838.4 after the Bank of England raised interest rates a quarter point to 4.75 per cent. Almost 3.3 billion shares changed hands.

Banks were among the hardest hit: HBOS fell 30p to 959p and Alliance & Leicester lost 36p to 995p.

Kensington, down 30p at 868p, and Paragon Group, 25p lower at 608p, both specialise in lending to those that may otherwise struggle to get credit.

Losses were steeper still for Countrywide, the estate agency group, which fell 34p to 387p as housebuilders and property groups also suffered. Barratt Developments was down 50.5p at 945p, while Dresdner Kleinwort turned more cautious towards Bellway, down 52p at 1,165p.

Housebuilders were also hurt by a survey from Halifax, the H in HBOS, showing house price inflation grew more slowly than expected in June. The average price of a house is now £177,020. The property website Rightmove.com fell 16.5p to 270p.

Retailers were marked sharply lower too amid concerns that higher interest rates would dent consumer confidence. Liberty International, the shopping centres group, fell 49p to 1,104p, Kingfisher, the owner of the B&Q DIY stores, was down 7.75p at 236.5p, and Marks & Spencer eased 17.5p to 580p. Debenhams fell 8.5p to 169p.

Oil companies slipped as Chris, the tropical storm threatening supplies in the Gulf of Mexico, eased. Cairn Energy fell 86p to 2,076p and BP lost 14p to 637p.

The miners were unsettled by details of higher costs at Rio Tinto. Vedanta Resources was down 51p at 1,268p.

HSBC cut its rating on another miner, Lonmin, to "underweight" from "neutral" on valuation grounds. The shares fell 96p to 2,720p.

Andrew Snowdowne, an analyst at UBS, was cautious about prospects for the steel sector as over-supply takes the shine off prices. He no longer recommends that clients buy Corus shares, which fell 17p to 398p.

ITV aside, only three of Britain's biggest 100 companies gained ground. The internet gambling group PartyGaming edged 0.5p higher to 110p after buying Gamebookers, an online sports betting business from Trident Gaming for €102m (£69m) in cash. PartyGaming, which was advised by Dresdner Kleinwort, expected the deal to enhance earnings this year.

An encouraging sales update lifted the supermarket group William Morrison 7.25p to 213p. Analysts at Seymour Pierce reckoned the shares would outperform. ABN Amro lifted its target price for the shares to 250p from 200p.

Broker upgrades also lifted the ceramic engineering specialist Cookson 7.25p to 516.25p and the media buying group Aegis 1p to 122.5p. Credit Suisse told clients that Aegis shares are likely to outperform and pointed out that the company may attract a bid from a bigger rival such as WPP, Publicis, Havas or Bolloré.

Better-than-expected interim results from Trinity Mirror buoyed other newspaper publishers in trying times for the industry. Johnston Press added 4p to 383p, while Daily Mail & General Trust advanced 5p to 576p.

Steady first-half results also lifted the car parts maker GKN 14.75p to 277.25p. Tomkins, the engineering group, rallied 5p to 271.75p after sharp losses on disappointing second-quarter results earlier this week.

Among the smaller companies, the spread-betting company IFX Group settled 3.5p lower at 179p after recommending a 180p-a-share cash offer from larger rival City Index.