Stocks surrendered strong early gains to close virtually flat yesterday as Wall Street opened lower and technical analysts fretted over the US rally running out of steam. The FTSE 100 ended just 1.7points firmer at 4,100.1 with the FTSE 250 3.1 points softer at 5,342. Volume was a tame 2.3 billion stocks.

HSBC, the world’s second-largest bank, ensured a big reporting week for the sector got off to a solid start. Shares rose 1.7 per cent to 7771/2p as HSBC exceeded market expectations by reporting a 21 per cent rise in first-half pre-tax profits to $6.1 billion.

Royal Bank of Scotland, which reports today, added 0.6 per cent at (pounds) 17.42, helped by an upgrade in its long-term credit rating from Fitch, while Standard Chartered, tomorrow’s star turn, firmed 1.1 per cent at 7941/2p.

Supermarkets were stronger, notably William Morrison, up 2.2 per cent at 1871/4p, and Tesco, 1.2 per cent up at 2133/4p, amid reports of a partial return to recently neglected defensive stocks. Peer J. Sainsbury firmed 0.8 per cent at 266p as the founding family denied plans to reduce its 35 per cent stake.

But Shire Pharmaceuticals headed FTSE 100 decliners, losing 4.3 per cent at 4491/2p following a downgrades by Credit Suisse First Boston and ING.

Xstrata, the zinc and coal miner, fell 3.8 per cent to 421p as it launched a $600 million convertible bond issue to re-finance short- term debt. Market talk was that institutional investors, particularly hedge funds, were selling or shorting Xstrata stock in order to free up cash to buy the convertibles, which mature in 2010.

Chemicals group Yule Catto slid 12.5 per cent to 3231/2p as Mylan Labs of the US said it had started competing against Germany’s Schwarz Pharma in selling a generic version of AstraZeneca’s Prilosec heartburn drug. Yule Catto supplies the active ingredient to Schwarz. AstraZeneca slipped 1.4 per cent to (pounds) 23.96.

Engineering and ceramics group Cookson added 5.5 per cent at 29p, with some hoping for an imminent sale of Speedline, the loss-making electronic equipment maker Cookson put on the block last week. ASML of the Netherlands was named as a potential buyer.

EMI climbed 3.5 per cent to 1471/2p amid unsubstantiated reports that the music group is in talks with private equity player Blackstone about going private.