Market Report: Average earnings news knocks wind out of bulls

DISAPPOINTMENT over a larger-than-expected increase in UK average earnings figures swiftly deflated the market's euphoric mood in early dealings after the overnight hike in US interest rates by the Federal reserve.

A 34-point surge in the FT-SE 100 share index was sliced in half less than an hour after the bell, when the UK economic data clattered into the market.

Until then, the rise in blue chips owed more to institutional buying support than market makers simply raising prices on the back of the previous day's performance on Wall Street, where the Dow Jones index registered a near 50-point climb to 3,720.61. Volume trading by 10am in London exceeded 222 million shares.

After the UK economic figures, however, the market lacked direction until Wall Street opened. But with the rate rise having little effect on a depressed dollar, the US influence was not positive.

The Dow struggled to stay up after Wall Street opened. This lead to rapid selling of UK blue chips, and Footsie closed 7 points down at 3,116.5. Total equity trading topped 722 million.

Similarly, initial gains of 1.5 points in longer dated gilts were pulled back by half a point by the close as profit-takers moved into the US treasuries market. On Liffe, the June gilt future was up 12 ticks at 105 25 32 after trading as high as 106 5 16 .

Gold, though, recovered most of its early losses and closed at dollars 382.5, down 25 cents. Rhona O'Connell, bullion analyst at T Hoare & Co, said the Fed action had taken a lot of the uncertainty out of international markets and gold had come under surprisingly little pressure.

Amid the big fallers in the top 100 companies, Reckitt & Colman dropped 40p to 634p on poor trading news at the annual meeting. Kleinwort Benson set the tone for the share's performance, prompting a 11p fall before the chairman stood up by saying the shares were a sell.

Reckitt's investors were told the current year had started slowly and trading was as difficult as it was in 1993. Competition in European and North American markets remained intense.

Nurdin & Peacock was clipped 9p to 200p on disappointing news from its annual meeting. The company said there had been no significant increase in customer spending. Sales to date were 5 per cent on the same peiod last year.

Movements among the big battalions saw British Gas, selling its Bow Valley stake for pounds 348m, lose 2p to 279.5p. First-quarter results are due today. Merrill Lynch was reported to have slightly downgraded the company from above average to buy.

It is also said to have slightly upgraded BT, up 2.5p to 379p, from buy to above average. Annual results are due today.

Goldman Sachs reportedly took a liking to some water utilities. Anglian firmed 5p to 492p, Wessex added 1p to 620p, and Severn Trent closed 3p better at 501p.

RTZ, a main mover of late on the surging price for copper, was confronted by some profit taking. Shares fell 13.5p to 873.5p. However, Antofagasta, involved in metal mining in South America, continued to rise and finished 50p higher at pounds 17.25.

The day's best performer was NMC, the packaging group, which soared 42p to 159p on news of a takeover approach. No suitor was named, but Britton Group, unchanged at 165p, is one name in the frame.

Sectoral neighbour David S Smith finished at 538p, up 16p, but for different reasons. SG Warburg is said to have sharply upgraded profit forecasts for 1994/5 from pounds 50m to pounds 62m and for a year later from pounds 77m to pounds 90m. Some 1.2 million Smith shares changed hands.

Remaining in paper and packaging, Portals fell a further 5p to 785p with still no sign of De La Rue, off 2p to 854p, tuning its bid threat into reality.

Elsewhere on the takeover front, Ibstock Johnson gained 5p to 79p on the resurfacing of rumours of a bid by Tarmac, which was down 1p to 160p.

Builders were generally firm with Strauss Turnbull positive on the sector. RMC Group added 10p to 904p, Pilkington firmed 5p to 189p, Hepworth closed 9p better at 363p and Anglian Group rose 7p to 240p.

Baggeridge Brick climbed 11p to 137p after announcing a surge in interim profits from pounds 383,000 to pounds 1.56m.

English China Clays missed the boat, though, falling 11p to 444p due to a overhang of stock.

The two latest newcomers had a drab session. Healthcall, issued at 105p, closed at 104p. Lombard Insurance ended the day 1p above its flotation price at 161p.

Expect British Aerospace shares, down 9p to 475p, to remain a weak market. Restrictions on foreign share ownership in the maker of military aircraft have been breached again. Foreign investors hold 29.52 per cent against a permitted 29.5 per cent. The situation usually unwinds itself, but market makers no doubt will hold fire until the overhang of stock, albeit small, is cleared.

There was a respite for Porter Chadburn's long-suffering investors, with the price rising 5p to 28p on more disposals. The Leeda fishing tackle business and some other assets have been sold for pounds 4m to a company in which the directors of Leeda have an interest. This completes the exit from consumer products, leaving Porter with interests in packaging and distribution.