Market Report: Chill winds take heat out of retail

THE CHILL winds of retail anxiety are again whistling through the stock market. Disappointing interim trading statements from J Sainsbury and Whitbread, and a raft of profit downgradings served to kill off any chance of further Footsie progress.

The blue-chip index ended 37.3 points off at 5,293.9; at one time it was down 92.5. Sainsbury led the Footsie retreat with a 34.5p fall to 525p.

Other supermarket chains were hit, with Asda under particular pressure. Besides any of Sainsbury's waves, it had to contend with caution from Morgan Stanley which cut its profits forecast by pounds 12m to pounds 420m and removed the outperform tag from the shares. The investment house said sales were growing by around 3 per cent, half the level of six months ago. Asda slid 9.5p to 158p.

Tesco lost 5.5p to 157p; Safeway 11p to 295p and Somerfield 17.5p to 384p.

The supermarket chains, facing an Office of Fair Trading probe into their profitably, are due to meet ministers next week to discuss their pricing policies.

The gloom extended to Marks & Spencer, with interim figures due next week. The shares fell 25p to 438p as the market braced itself for a profits setback. Investment house BT Alex.Brown is looking for a 16 per cent decline to pounds 380m.

Whitbread fell 27p to 788p. The brewing, pubs and restaurant group rolled out a downbeat interim statement, prompting analysts to cut year's forecasts by around pounds 10m to pounds 370m. Sharp falls in July and August industry beer production had little impact on brewing shares, merely confirming the downturn outlined by Bass, other pub groups, and now Whitbread.

Elsewhere on the increasingly threadbare retail front, Allied Carpets fell 1p to 42p. It is still talking to potential bidders but admits sales are falling. MFI, the furniture retailer, lost 1p to 35.75p as Salomon Smith Barney slashed its profits forecast from pounds 28m to pounds 14m. In 1997 profits were pounds 70.3m.

Others suffering from lower consumer spending included Inchcape, the car dealer, off 8.5p to 100p, and Vymura, the wallpaper group which received a pasting of 34.5p to 77.5p after a profits warning.

Inchcape, once a Footsie constituent, is being reshaped through disposals. Five years ago its shares touched 625p.

Water shares displayed ripples of unease ahead of today's Ofwat review which could hinder profits and dividend growth. United Utilities fell 12p to 880p and Thames 17p to 1,055p.

Supporting shares managed modest headway. The mid cap index edged ahead 1.7 to 4,717.4. It has lost ground once in the past 14 sessions. The small cap index managed a 0.4 gain to 1,970.4.

Regal Hotels fell 2.5p to 29.5p after declaring it was not in take over talks, but PSD, the recruitment group, climbed 40p to 287.5p as it appeared to have lost the chance to intervene in the bid for rival Robert Walters.

After Walters accepted a US bid, PSD built a 6 per cent interest and a friendly stockbroker also created a stake, leading many to feel it intended to mount a counter offer. In the end PSD seems to be content with the profits it made on the shares. Walters, accepting its US fate, held at 275p.

Cambridge Antibody, the drugs group, jumped 26.5p to 182.5p on takeover suggestions and Medeva rose 11p to 106p reflecting prospects for its hepatitis B vaccine.

Hepworth, the building materials group, scored an intriguing 10.5p gain to 159p. BT Alex.Brown was said to be bidding for stock. Turnover was a significant 2 million shares. Hepworth has been buying back its shares through HSBC; so far it has netted 850,000. UBS is also a follower and has lifted its stake to almost 14 per cent.

Tullow Oil's Bangladesh saga seems to be coming to an end although hopes of an agreement by Monday were clearly wide of the mark. The shares rose 8.5p to 78.5p; Cairn Energy, which should be around the same negotiating table, fell 3.5p to 140p. Tullow's interim results are due tomorrow.

Growing expectations that BSkyB's controversial bid for Manchester United will go before the Monopolies and Mergers Commission lowered the shares 7p to 213p.

First Choice, following an upbeat trading statement,climbed 8.5p to 99p. Other holiday groups moved higher.

Lower interest rate hopes continued to influence housebuilders with Barratt Developments putting on 14p to 222.5p.

Pilkington, the glass-maker, had an uncomfortable session ahead of today's figures. The shares eased 2p to 63.5 in busy trading. Interim profits, before exceptional items, are now expected to be around pounds 65m. .

British Biotech, the hard-pressed drugs group, held at 37p with volume of 24.5 million swollen by what appeared to be a bed-and-breakfast deal in 24.2 million shares.

SEAQ VOLUME: 718m

SEAQ TRADES: 53,900

GILTS: 110.16 -0.50

IN A share buyback, the builder Alfred McAlpine has picked up 6 million shares at 140.28p in two days. It intends to buy back 10 per cent of its capital.

This week's spending spree has realised about half its target. The shares eased 1p to 140p; they have been up to 180p this year.

OVOCA RESOURCES, a mining company, fell 5p to 22.5p. It said it "regretted" bullish statements made by chairman Paul Smithwick. He said the shares could go to 400p if matters went according to plan. Ovoca said that "on current information" a price of 400p was "totally unjustified"; it is up to the market to determine the share price.