Market report: Tuesday close

BANK of England Governor Mervyn King's comments about the possibility of a house-price crash and the need to raise interest rates certainly hit the target in the City.

King warned house prices are now well above what most people would regard as sustainable in the longer term. He is the man who should know and his threat to drive up rates was not lost on investors.

As a result, shares in housebuilders were suffering a bad case of subsidence today.

Biggest fallers included George Wimpey, down 10 1/4p to 368 1/2p, Taylor Woodrow, 5 3/4p to 249 1/4p, Wilson Bowden 33p to 1024p, Bellway 27p to 738p and Barratt Developments 11 1/2p to 569 1/2p.

Mortgage lenders were also hit, Abbey National slipping 3p to 475 3/4p and HBOS shedding 7p to 707p. Cynical traders say King's comments provided investors with a chance to shake the tree and drive prices lower.

Shares generally were marked higher, supported by an opening rally on Wall Street this afternoon. London's FTSE 100 index rose 25.40 to 4458.60, but trading conditions remained thin as the summer season got into full swing with the start of Royal Ascot.

Burberry boss Rose Marie Bravo has enhanced her position as Britain's highest-paid businesswoman. She has exercised an option on 300,000 shares in the fashion house's parent GUS, netting £686,000 profit.

Bravo took up the options at 613p and promptly sold them on at 842p. Burberry shares were unchanged at 390p. The American is already credited by folk in the City with having re-invented Burberry and having driven profits sharply higher.

Just last month, Burberry reported a 63% leap in full-year pre-tax profits last year to £139m with the promise of even better to come.

At the last count, Bravo's pay and bonuses topped more than £6m and brokers say her payout this time around is likely to be even higher. Not bad work if you can get it.

GUS, 6p cheaper at 830p, can reduce its 66% stake in November.

MFI retreated 3 1/4p to 152 1/4p with a line of 300,000 shares going through at 152p. Broker Credit Suisse First Boston has talked to the company and now expects pretax profits for the year just ended to be down 33% at £35m

Online bank Egg firmed another 2 3/4p to 162p. Has parent company Prudential, up 6 1/2p at 457 3/4p, finally found a buyer for its near-80% stake?

Brokers have differing views about the Government's backtracking on plans to liberalise the gaming industry. Stanley Leisure rallied 1p to 447p although broker UBS has downgraded its target from 500p to 460p. UBS has also slashed Rank from 355p to 325p. Today Rank closed 6p higher at 291 1/2p,.

William Hill rallied 16 3/4p to 536 1/4p after Smith Barney repeated its buy recommendation and argued that concerns over UK gaming reform were misplaced. It insists bookmakers are unaffected by the legislation.

Prepared-food specialist Geest firmed 3 1/4p to 578 1/4p. UBS has downgraded from neutral to reduce but has retained its 12-month target of 500p.

Software specialist Civica rose 2 1/2p to 193p after producing maiden interim profits up 12% at £3.8m. The shares were floated on AIM at 175p in March.

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