Market Report: 5.94bn pounds share values go up in smoke

THE US cigarette 'war' cast a cloud over shares yesterday, wiping pounds 5.94bn from stock market values as the FT-SE 100 index slumped 31.1 points to 2,838.8, its lowest for six weeks.

There are fears that the decision by Philip Morris, the US drink and tobacco giant, to cut the price of its world-famous Marlboro cigarettes will be followed by other American groups.

Could, for example, Procter & Gamble, the American detergent maker, be tempted to follow the Philip Morris example? Such a possibility was one influence behind a 26p fall to 1,163p by Unilever, the Anglo-Dutch group which makes a wide range of detergents.

The shares also had to contend with a series of City investment meetings which seemed to turn at least one securities house bearish, although others remained positive.

BAT Industries, the third largest cigarette group in the US, remains the most obvious casualty of the Philip Morris initiative. Its shares fell 42.5p to 885p. They have slumped 114p since the surprise Philip Morris announcement on Friday.

The latest fall occurred as many analysts were advocating the merits of the shares, maintaining that Friday's fall was far too steep.

BAT said it was 'still evaluating' the new trading conditions in the US.

Rothmans International was also hit - down 21p to 636p, a two-day 39p decline.

British Airways had a low-flying session. The shares ended at 275p, down 20p. The fall included the 7.5p brought forward dividend. Disappointing traffic figures and air fare cuts in Europe did the damage.

With competition in the already tough airline business increasing analysts were quick to downgrade. S G Warburg cut from pounds 195m to pounds 180m and from pounds 320m to pounds 280m.

Hotel shares remained unsettled by the rapid fall from grace of Queens Moat Houses. Forte, reporting next week and a candidate for a dividend cut, fell 5p to 179p. Resort Hotels lost 4p to 36p.

Ladbroke, the Hilton Hotels chain, also had to contend with the Grand National fiasco which the market believes will cost it pounds 2m. The shares ended 4p lower at 172p. Stanley Leisure, a bookmaker, was another victim, down 10p at 193p.

Wellcome steadied after Friday's slump, gaining 13p to 705p. SmithKline Beecham lost ground, off 9p to 413p. Glaxo Holdings, for once, was little changed.

The nil paid rights of the Medeva healthcare group were busily traded, probably indicating the sale of the ADR rights allotment. The shares fell 3p to 223p.

WPP, the communications group, enjoyed a 79.7 per cent rights take- up with the remainder, largely related to US investors, placed by Panmure Gordon at 60p against a 45p rights price. The shares gained 4p to 64p.

Enterprise Oil and Lasmo were ruffled by Hoare Govett downgradings. This year's net income estimate for Enterprise has been cut from pounds 94.2m to pounds 72m and next from pounds 135.6m to pounds 120m. For Lasmo this year's loss forecast has widened from pounds 21m to pounds 57.9m and next year's expectation changed from a pounds 13m net income to a loss of pounds 14.6m.

Enterprise fell 5p to 497p and Lasmo 1.5p to 160p.

Pilkington, the glass maker, is emerging as the favourite takeover target for cash-rich MB-Caradon. The shares rose 3p to 117p. Norcros, regarded as another possible MB candidate, gained 2p to 160p. Morgan Crucible tumbled 38p to 289p in response to its results.

The international trader Inchcape quickly shrugged off the impact of a story about an insurance dispute with the Dalgety food group. At one time down 23p, Inchcape ended 5p lower at 585p. Dalgety fell 14p to 452p.

Dixons, the electrical retailer, slipped 3p to 208p. NatWest Securities has trimmed this year's estimate by pounds 3m to pounds 82m and next by pounds 9m to pounds 88m.

NatWest also produced the view that defensive blue chips had been unjustly neglected in the rush to buy recovery shares.

It said that in the 1980s recovery shares started to run once the recovery was under way but this time the advance has taken place much earlier. A switch back to the 'friendless and undervalued good quality blue chips' is likely, it believes.

NatWest likes Argyll Group (which also collected a buy recommendation from Henderson Crosthwaite), Grand Metropolitan, Guinness, J Sainsbury and SmithKline Beecham.

Morgan Crucible, Royal Insurance and Wolseley should be sold, it says.

BTR, the conglomerate, was little changed at 610p. Some dealers picked up a story that its Australian group, BTR-Nylex, was about to buy some metal operations from BICC, down 2p at 350p.

Last week's new issue high-flyer, Quality Software, continued to give ground, falling 15p to 468p. Placed at 380p the shares opened at 510p and even attracted a deal at 570p.

Euro Disney retreated again. The shares shot ahead 93p following an announcment of a new pricing policy at the French theme park. But a 20p fall to 1,065p left them below the best level achieved after the pricing news.

Huntleigh Technology, the healthcare group, had an eventful session. In a thin market the shares were at one time above 1,000p. But they closed unchanged at 950p.

The FT-SE 100 share index ended near the day's low, down 31.1 points at 2,838.8. The FT-SE 250 index lost 17.7 to 3,090.8. It was one of the quietest days this year, with turnover at 437.7 million shares. The account ends on 16 April, with settlement on 26 April. Gilts gave ground

Conrad, formerly Conrad Continental, is on the verge of moving into the hard-pressed hotel industry. It is thought to be keen to buy properties from receivers. The company has eliminated debt by raising pounds 820,000 through a placing and open offer and the board has been strengthened. It takes in Bobby Charlton Enterprises, running football schools, and a sports strip business. The shares fell 0.5p to 4.5p.

First stage of the restructuring of the financial group LIT Holdings failed to impress, leaving the shares 1.5p down at 4.75p. LIT is selling its US futures business for dollars 7.7m cash and dollars 18m in 10-year loan notes. Talks are going on with bankers about an equity-for-debt exchange which will lead to a 'substantial dilution' of ordinary shares. After the sale its main business will be Johnson Fry.