Traders wait for the rates to drop

Traders were left scratching their heads yesterday about the rally that never was. Having gained more than 130 points on Tuesday, the FTSE 100 index trod water for much of yesterday with little activity.

Hopes of a pick-up when Wall Street opened were dashed. The Dow Jones index was sporting gains of just 30 or so points when the FTSE 100 closed down 36.6 at 4094.4.

With US investors providing little direction to the market, British traders - those not on holiday - decided to sit on the sidelines, dealing in stocks affected by specific announcements. Any selling was reined in by hopes that rates will be cut soon in Britain or the US.

The two main features on the downside were Royal Bank of Scotland and AstraZeneca, while Standard Chartered was the day's obvious gainer.

Royal Bank of Scotland dropped 87p to £14.43 as the markets discounted a 15% increase in first-half profits, focusing instead on a possible shortfall in the company's pension fund and the likelihood of Spain's Banco Santander selling out.

Traders said a rumour about a possible pensions black hole at the company has been doing the rounds over recent days but has been denied by the company's house broker.

More important to sentiment were rumours that Banco Santander is preparing to sell its 8% stake in the firm, which has always been seen as a strategic holding. All the Spanish bank would say is that no decision has yet been taken, but its alliance with the Scottish bank would continue regardless of whether or not there was any equity relationship between the two.

AstraZeneca dropped a further 46p to £22.02 in reaction to Tuesday's news that the roll-out of cholesterol buster Crestor in the US market has been delayed.

Standard Chartered ended up 61p at 670p after reporting first-half profits ahead of expectations.

Royal & SunAlliance gained 7.25p to 142.75p ahead of the company's results today. The shares have been in the doldrums recently as the company approached its major shareholders to discuss a possible fundraising. It received little backing, so the rumour is that the company will instead securitise the premium income coming into its life business.

Such a move would be slightly controversial because it is not entirely clear whether that cash belongs to the firm in the first place.

Apart from that issue, today's figures - barring problems in the US - are expected to be solid.

Elsewhere in the market, buyers emerged for Granada, up 1.75p at 83.75p, as talk about a possible bid from a US media powerhouse was reignited. Cadbury Schweppes gained 0.25p to 448p as Deutsche Bank turned positive on the stock, moving to buy, and slapped a 500p target on the snacks and confectionery business.

A solid set of results from US heavyweight Cisco after the bell on Tuesday night helped Dimension Data - a big Cisco reseller this side of the pond -gain 0.5p to 24p.

But fellow tech stock Sage dropped 6.75p to 116p as Goldman Sachs cut its forecasts for the accountancy software group. CMG also continued its recent falls, down 2.25p at 58p.

The housebuilding sector performed well as traders speculated that interest rates are likely to remain at current levels for at least the rest of the summer. Barratt Developments gained 21.75p to 368p while Persimmon picked up 23.75p to 374.5p.

Among the smaller stocks, shares in Television Corporation dropped 16 to 195p on rumours that trading at the independent production company has been poor and a warning is in the pipeline.

Shares in Earthport added 1p to 3.25p as the e-commerce company signed a deal with Ladbrokes to supply the betting company with its online payment system. It is the first big betting company to do a deal with Earthport and the e-commerce company is confident that it will be able to secure further contracts.

Stylo added 8p to 32p as the company announced the full details of its proposed capital reorganisation that will return 10p-a-share in cash and buy a tranche of shares at 45p each.

Shares in Coffee Republic picked up 0.25p to 4.75p after the company admitted that it has received a takeover approach. While immediate talk was of a bid from rival Caffe Nero, which picked up a 4.3% stake at the start of the week, there remains a question over the possible involvement of hi-fi entrepreneur Julian Richer, who owns just over 16% of the business.

He is understood to back Coffee Republic's current management - there had been talk that he might help them take it private - and yesterday's curt statement from the business indicates that the unnamed bidder is not well known to the business. Perhaps Mr Richer is willing to do a deal himself, some suggested.