Market Report: Unsettled traders show surge of interest in metals

MINING shares glistened in a dull stock market, unsettled by worries about the strength of the US economic recovery and the latest European currency turbulence.

Golds achieved sharp gains as the metal touched its highest level for 18 months. Silver and other metals were also strong. New York opened weak, with investors chasing gold shares.

Metals are, of course, the traditional haven in times of economic stress and strain. But some observers felt the upsurge had been overdone. Rhona O'Connell at the stockbroker Williams de Broe said: 'I expect to see some profit-taking in the Far East overnight.'

The Gencor unbundling move was another influence. The South African giant announced on Tuesday its intention to give up control of its non-metal activities and is likely to bid for Shell's metal operations. Any deal between the two could be worth up to pounds 1.5bn.

The reshaping of South Africa's second-largest mining enterprise has thrown the mining industry into the proverbial melting pot. One that could take advantage of the planned changes is Lonrho, where the German Dieter Bock has become joint chief executive with 'Tiny' Rowland. One suggestion is that Lonrho could float off some of its South African interests, possibly in a deal involving Gencor.

Lonrho shares, already buoyed by the strong metal price, rose 4.5p to 118.5p, a 1993 high.

The FT-SE index, at one time 6.6 points higher, ended 11.5 down at 2,849.3. But the second-line FT-SE 250 index rose 6.9 to 3,151.9, less than 3 points from the peak hit in March. A French interest rate cut and continuing hopes of an economic upturn relieved some of the transatlantic pressure.

The search for solid assets engulfed property shares, where Land Securities set the mood with better- than-expected asset figures. LandSecs rose 6p to 551p, dragging in its wake the likes of British Land, 14p stronger at 282p, and MEPC, up 12p at 418p. Slough Estates gained 12p to 190p.

P&O was pulled into the assets search on the back of its building and property interests, advancing 8p to 578p.

Rank Organisation's meeting with analysts left the shares 4p firmer at 700p. Nigel Reed at Paribas Capital Markets cut his profit forecast from pounds 272m to pounds 256m.

Rolls-Royce drew further strength from its US aero engine orders, rising 10.5p to 149p. But Simon Engineering had another torrid session following a gloomy statement, tumbling 21p to 52.5p. The shares have nearly halved in two days. Carr Kitcat & Aitken sell advice left Vickers 2p down at 135p.

Shell's results enlivened British Petroleum, up 8.5p to 325p. The Shell price gained 20.5p to 612.5p, with Barclays de Zoete Wedd suggesting the shares were worth 700p. Shell has advanced 55.5p this week.

Drug shares were under the weather again, with some trades below the then-ruling market price in New York disturbing sentiment. Wellcome dropped 24p to 742p. Unofficial deals in Zeneca left the shares down 16p at 648p with the nil paid at 52.5p, off 13.5p. Imperial Chemical Industries eased 5.5p to 1,279p with the feeling that what is in effect the rump of the group could represent a better buy than the drug spin-off.

London International Group was hit as unwanted lines of stock came on offer. The shares fell 10p to 186p. Problems with a Far Eastern venture were cited for the weakness of the shares.

Tomkins, following analyst meetings, fell 3p to 226p. NatWest Securities described the shares as a 'buy for the long term'.

Unilever, first-quarter results today, rose 14p to 1,104p. Profits of up to pounds 450m are expected. Last year's corresponding figure was pounds 388m.

Micro Focus, which has a big US following, dropped 125p to 2,295p following a sharp profit downgrading by an American investment house.

Excitement welled at the engineer James Wilkes, up 5p to 76p. In busy trading it appeared that the mini- conglomerate Suter was seeking stock. It already held 10.2 per cent and could now be around the 12 per cent mark. A bid is expected.

Hunterprint was another in the takeover frame, up 10p at one time. The shares closed 5p higher at 80p as a bid approach was disclosed.

Downiebrae, the engineer where a revamping exercise is awaited, rose 5p to 71p. Some expect an announcement next week.

TSB Group was another to attract takeover attention. The shares were at one time up 5p but closed with a 2p gain at 181p.

Buckingham International, the struggling hotel group, rose 1p to 7.5p (after 8p) as a buyer picked up 200,000 shares.

Euromoney Publications spurted 88p to 988p following results; Burton Group responded to its figures with a 4p gain to 85p, with many analysts upgrading their expectations.

Next was also firm, up 6.5p to 164.5p, and Laura Ashley rose 6p to 108p.

Cheerful comments at the agm lifted Bluebird Toys 25.5p to 219p. The little oil and gas stock Oliver Resources, soon to be Dragon Oil, was at one time 1p higher at 3.25p but by the close had lost most of the gain.

AN EARLY gain was eliminated and the FT-SE 100 index ended 11.5 points down at 2,849.3. The FT-SE 250 index, however, rose 6.9 to 3,151.9. Volume was 797.6 million shares with 29,260 bargains. The account ends 21 May; settlement is 1 June. Gilts retreated.

RHINO Group, the computer games retailer run by Bev Ripley and Terry Norris, the former Cityvision duo, is in talks to buy high street sites from Ratners. Starting from scratch about six months ago, Rhino has opened 21 shops, and a deal with the struggling jewellery chain could push its retail network to about 40 by Christmas. Rhino fell 0.5p to 28p; Ratners was 3.25p off at 31.75p.

ODD GOINGS-ON at Drayton Asia. Although EFM Dragon Trust has acquired 78.58 per cent of the capital a line of 7.4 million non-assented shares was placed by Panmure Gordon at 119p. Last week the stockbroker placed another non- assented parcel. Some wonder whether a blocking exercise to prevent EFM getting full control is under way. Its offer priced DA, unchanged at 122p, at about pounds 120m.