Market Report: Fears of profit warning weigh on Northern Rock

It was a quietly positive day on the UK markets, although not if you were a shareholder in Northern Rock. The perennial shorters' favourite slumped to the worst performance on the top tier, as speculation returned of a forthcoming profit warning in the stock. The Newcastle lender last warned on profits in June, and there has been consistent gossip ever since that another bearish statement was to follow. It closed down 4.91 per cent at 639p.

Royal Bank of Scotland was also down, with traders saying the market was turning on the bank's offer price for ABN Amro. It closed down 6.5p at 535p. It dragged much of the sector down, with traders talking of one broker backing investors to swap their funds into insurers instead.

The FTSE 100 was down in the morning as credit fears lingered, compounded by figures from the Royal Institution of Chartered Surveyors, which said house prices had fallen for the first time in two years.

Confidence returned in the afternoon, with one trader saying the market "didn't feel too bad". Volume was low. It closed up 57.7 points at 6363.9p.

The blue chips were led up by the miners, with Lonmin the best performer. The group posted gains of 3.66 per cent at 3426p.

Lehman Brothers support saw Unilever rise 22p to 1611p, saying a group overhaul had improved operational results. A simplification of its structure had led to quicker innovation, while cost-cutting plans should boost margins, the broker added.

At the other end of the scale, a US court ruling had investors in AstraZeneca reaching for the downers. The ruling paved the way for the potential launch of a rival ulcer drug to Astra's Nexium. It closed 12p lower at 2388p.

DIY group Kingfisher also suffered after Evolution Securities asked questions of the management and its strategy. The company downgraded the stock's target price ahead of its interims next week, saying: "Over the last three years, results will have consistently disappointed." The stock, which was at its all-time low against the UK market, closed 0.76 per cent lower at 196p.

It was a mixed day for the companies preparing to join the FTSE 100, following the index review. Carphone Warehouse was up 2.5p at 354.5p, Taylor Wimpey shed 10.75p at 331.75p, and Tullow Oil closed down 7.5p at 552.5p.

Second-tier pace-setter Kier Group stormed to the top of the leaderboard, rising 140p after reporting cracking full-year results. The shares weakened later as investors locked in profits, closing up 25p at 1945p.

Cobham was another solid performer, after its financial director, Warren Tucker spent over £130,000 on buying into the company. The aerospace and defence company shrugged off Goldman Sachs lowering its price target, and closed up 1.99 per cent at 191.75p.

There were further woes at JJB Sports, which was smashed last week after warning of a slowdown in full-year sales. It gave up a further 4.37 per cent, despite rallying from the worst performer on the second tier to close at 164p.

Engineering group Charter was also among the fallers after it was downgraded by UBS, closing down 3.73 per cent at 1136p. The Swiss broker said the stock had outperformed the FTSE All share by 32 per cent in the past six months, and was now fully valued.

On AIM, the battle for Consolidated Minerals continues. The board initially recommended an offer of A$2.28 per share, and has since switched allegiance several times as bidders piled in. The market thought the fat lady was warming up as Pallinghurst bid A$3.95 last week, but Ukrainian rival Palmary stormed back late on Wednesday, raising the offer by 15 per cent. The board has once again switched recommendations, with the shares closing up 4p at 183p.

Best growth performer was Avanti Screenmedia after winning two contracts, one worth up to £1m over the next year. The group, which caters to retail, leisure and shopping malls in the UK, closed up 38.1 per cent at 7.25p. This stock has been smashed over the past year, dropping from its 41.3p peak in November to 1.5p last month.

Global Energy Development was also up after it received interest for a potential takeover. The Latin America-focused petroleum group said it had received "several unsolicited expressions of interest from separate parties". The stock rose 28.33 per cent at 115.5p.

At the other end, Image Scan shed 45 per cent, after warning on wider full-year losses. The group, which makes X-ray imaging devices, said the company's order book was forecast to fall, sending the shares down to 8.25p. Jessops was another faller, closing down 10 per cent, after its finance director, Ian Harris, stepped down after only 10 months.