Market Report: Buyers develop renewed taste for Guinness

TALK of an imminent disposal and renewed institutional interest in brewery shares provided a tonic for Guinness yesterday.

There is speculation that LVMH, the French luxury goods company in which it has a 20 per cent interest, is close to selling Roc, a highly regarded perfume maker. The story has emerged at a time when Guinness is back on some brokers' buy lists.

It is believed LVMH could sell the perfume business for between pounds 70m and pounds 100m shortly. Although the sum is small beer for Guinness, the shares frothed 13p to 442p, with more than 5 million changing hands yesterday.

On Monday, they were given a push by NatWest Securities because of the group's long-term growth prospects and strong brands. The sector took a sharp fall earlier this year on fears that brewers and distillers would struggle to raise prices over the next few years because of a low inflationary era.

But the shares have been attracting renewed interest ahead of the reporting season, which kicks off tomorrow with interims from Whitbread. Patrick Kirby at Nikko Securities expects taxable profits to increase from pounds 127m to pounds 133m. The 'A' shares rose 10p to 499p.

Allied-Lyons, reporting next week, dipped 1p to 551p though Bass was 2p higher at 470p.

The rest of the market started on a weak note but perked up after the Bundesbank nudged money market rates lower. The move raised hopes of a half-point rate cut in Britain, probably after the Budget.

Futures buying and a programme trade featuring about 350 stocks - thought to be by Societe Generale Strauss Turnbull - contributed to a mild squeeze on market makers. By mid-morning the FT-SE 100 index reversed a modest decline.

Although the index broke through the 3,100 level during the afternoon, the rally petered out and it closed just 4.2 up at 3,097.5.

BOC, the industrial gases group, disappointed the market with an unchanged interim dividend and a gloomy trading statement. The results also contributed to the market's belief that interest rates would be cut.

BOC shares slumped 30p to 596p, dragging down Courtaulds, reporting today, 13p to 476p. Imperial Chemical Industries fell 6p to 682p.

Stores shares, however, were in demand ahead of October retail sales figures, due today. Kingfisher, the Woolworths and B&Q chain, improved 14p to 676p as Kleinwort Benson Securities recommended the stock.

Marks & Spencer gained 5p to 406p while Boots, the chemist, was 10p better at 526p.

Two power station contracts in India worth a total pounds 385m boosted Rolls-Royce 5p to 168p. A separate pounds 1bn deal by National Power in the same market lifted the electricity generator 1.5p to 400.5p.

British Airways offset Monday's decline with an 8p jump to 405p. It was helped by BAA, the airports operator, which reported a 9 per cent increase in first-half profits to pounds 237m. Although BAA shares dropped sharply after the results, they recovered strongly to close 20p ahead at 921p as the market drew comfort from rising passenger traffic volumes.

A bounce in crude oil stocks buoyed the sector but British Petroleum was hit by further profit- taking from the US. There are growing fears that the group's love affair with American investors is coming to an end. The shares slipped 9.5p to 341.5p.

A sell note from Kleinwort's respected oil team pushed Shell 9p to 681p. But Monument Oil & Gas, the independent, spurted 2.75p to 55.75p after it sold 3.9 per cent in a parcel of Liverpool Bay fields for pounds 50m to PowerGen.

It values Monument's remaining one-fifth interest in the area at pounds 200m, compared with its entire market value of about pounds 370m. Lasmo, the ailing explorer which owns a 30 per cent stake in the same area, added 3p to 133p in sympathy.

Tiphook, the troubled transport leasing group, crashed 40p to 58p in response to the company's announcement late on Monday that it was in talks to sell its containers business. The dividend will also be passed.

VTR soared 14p to 96p after the television production services company doubled its taxable profits for the year to 31 August.

Bluebird Toys surged 90p to 570p after the company gave a bullish statement on current trading.

The FT-SE 100 index closed 4.2 up at 3097.5 while the FT-SE 350 index was 2.1 higher at 1541.7. Turnover was high at 655 million shares from 27,404 deals. The account began on 16 November, ending 26 November. Settlement is on 6 December.

Nomura Research is advising clients to buy Carlton Communications. In a circular sent to investors yesterday, analysts Ron Littleboy and Martin Ainscough say Carlton will produce above average earnings growth in the next three to five years. They expect pre-tax profits to jump from pounds 127m to pounds 160m for the year ended 30 September. The shares eased 1p to 740p.

Shares in Frost Group, the petrol stations operator, are poised for a run. It is believed that the shares are to be reclassified in January. At present they are listed under miscellaneous, but are to be moved to the retail sector. Yesterday the group announced a 99 per cent take-up of its recent right issue. The shares, down 6p at 222p, are trading on 20 times prospective earnings.

NatWest Securities has turned bullish on Shanks & McEwan, the waste management group. It says the shares will outperform because of contracts won recently from five district authorities. The orders should boost volumes by 15 per cent a year. NatWest is expecting Shanks to report an 18 per cent drop in first- half profits to pounds 18m next week. The shares held at 125p.