Footsie and ICI sound a muted note

Market Report

IN DAYS gone by, Imperial Chemical Industries was regarded as the bellwether of Britain's economic health. It has since lost its barometer role, which is probably a relief to Westminster as its shares are signalling that the nation is already deep in recession.

They slumped 35p (after 63p) to 520p as the stock market digested the latest profits downgrade - from investment house Merrill Lynch

As word of the Merrill caution started to circulate on Monday, ICI fell 11p. Yesterday's decline took the once-proud chemical group to its lowest since the start of the 1990s.

Riding at 1,244p earlier this year, ICI has had a calamitous time. It created uproar when it was perceived to be nudging analysts' profits forecast lower, and then came in with a blunt profits warning which prompted some analysts to cut their year's forecast to pounds 400m.

Merrill has caused consternation by lowering its estimate to pounds 320m. Stockbroker Sutherlands, a bear on ICI even before the profits warning, is looking for pounds 300m.

Of course Merrill, a giant international US-owned securities house, carries more weight than Sutherlands, a modest London operation. What nagged at the market was the assertion by Merrill analysts Robyn Coombs and Judy Shaw that ICI's more glamorous specialty chemicals side was starting to feel the strain.

ICI banked heavily on transforming itself from a largely bulk chemical business into one enjoying specialty status. Last year it sold bulk operations and splashed out pounds 5bn on specialty businesses which were unloaded by Unilever, the Anglo Dutch giant. Judging from the Merrill comments, the specialty side offered only short-lived salvation and is now feeling a pinch as severe as ICI's rump bulk chemical operations. There are worries that ICI is having difficulty selling its remaining unwanted parts at anything near the price it once anticipated. Martin Evans at Sutherlands says: "The high level of gearing is a major overhang on sentiment."

The rest of the Footsie army spent most of the session in ragged retreat, with the index off 76.1 points at one time. New York helped to smooth ruffled feathers and Footsie ended 13.1 higher at 5,281.7. Supporting shares remained in the doldrums.

Next, the fashion retailer, had an eventful time, ending unchanged at 436p. It was hit by a CSFB sell, with the investment house suggesting interim profits would emerge at pounds 45m against hopes of pounds 49m.

JJB Sports, the retailer which raised pounds 105m at 440p a share towards the pounds 290m takeover of its Sports Division rival, slumped 35p to 320p, lowest since last year, on worries about the growth prospects for the sports- kit selling business.

Kenwood Appliances went to a year's high, up 9.5p to 147.5p, as hopes grew that the hard pressed kitchen equipment group will soon attract a predator. Pifco has made no secret of its takeover ambitions but there is a growing suspicion it will find itself pipped at the post by an Irish bidder.

Robert Walters, the recruitment group which has bowed to a US offer, rose 10p to 316p on the share interest displayed by rival PSD, which lifted its interest to 2.2 per cent. PSD, which said its share stake "kept its options open", slipped 5p to 326.5p.

Reuters, on Warburg Dillon Read support, improved a further 30p to 509p but Centrica fell 4p to 105p as Greig Middleton said sell because the shares were running ahead of the company's transformation.

Hanson, the building materials group, responded to WDR support with a 10p gain to 343p and Cable & Wireless, 20p up at 570p, was helped by cost cutting exercises at its 53 per cent-owned Hong Kong Telecom offshoot.

Lasmo, due to make presentations to fund managers about its South American operations, rose 3p to 171p and chemical group BTP, thought to be arranging an analysts' trip to the US, lost 8p to 369.5p. Metal Bulletin, the publisher, is another on the analyst trail, holding at 1,215p.

HSBC downgraded Royal Bank of Scotland. It lowered its estimates from pounds 1.03bn to pounds 907m. But the investment house continues to recommend the shares although the price fell 14p to 755p. Booker, rejected by Budgens, slumped 28p to 117.5p, a 14-year low. The struggling cash-and-carry chain had already been spurned by Somerfield.

Another bid emerged in the depressed textile sector, with Worthington descending on Jerome, up 11.5p to 45p. The bidder seems home and dry with acceptances representing 46.62 per cent of the capital. The bidder shaded 1p to 651.5p.

Celsis International, the drugs group, firmed 3p to 25p. A bid is expected. Some say a price of 40p has been agreed. The company said in June it had received bid approaches. Emerald Energy, seeking oil in Colombia, rose 1p to 8.5p: Seaq put turnover at 51 million shares.

SEAQ VOLUME: 816.8 million

SEAQ TRADES: 57,546

GILTS INDEX: n/a Dentmaster, specialising in car damage repairs, rose 1p to 4.5p after producing profits up nearly 30 per cent at pounds 685,000. The market expects pounds 840,000 this year. The group, controlled by chairman Lance Leonhardt, is looking for acquisitions and hopes to complete deals in its current year. It already has extensive Continental operations. The shares, which arrived two years ago, hit a 6p peak earlier this year. Expect more outstanding growth from European Sales Finance. Profits for the year, due to be announced next week, are likely to emerge at around pounds 1.3m against almost pounds 600,000 last time. The group, which is setting up shop in Germany, is planning to move from the AIM to a full listing. The shares held at 282.5p. They have been as high as 380p, but three years ago they were bumping along at 117.5p.