Market Report: Falling dollar hits City and European markets

THE market yesterday ran headlong into a wall of problems. Share prices fell sharply as dealers became concerned about the continuing rise of the pound and the fall in the dollar.

Worries about the dollar also hit trading on European bourses. Weaker bond prices on the Continent, particularly in Germany, unsettled the gilts market.

UK government issues were nearly a full point lower at one time, but losses were trimmed towards the close as the Bank of England announced plans to auction pounds 2.5bn of 8 per cent 2000 Treasury stock next week.

In equity trading in London, international stocks were hit the hardest by the shock waves from the foreign exchanges.

Support for the leading shares was further undermined by events on the futures market where Salomon Brothers was said to be a big seller of the December contract for the FT-SE 100.

In the cash market, the FT-SE 100 failed to hold on to the 3,100 mark as it slid throughout the session to 3,085.3 - a fall of 34.9 points. The FT-SE 250 lost 15.7 to 3,532.3.

Investors, though, continued to sit tight amid yet another day in the life of the volatile market. This is the eighth 30-point plus fall in the FT-SE 100 index in the last month - a ratio of one every three days.

Less than 530 million shares were traded, of which less than 36 per cent were accounted for by the top 100 shares. There were only 21,700 trades.

Share prices were also hit by a steady stream of bad corporate news, ranging from yet more boardroom bust-ups to profit warnings. Reaction, in some cases, was quite severe.

Paterson Zochonis slumped to a year's low as it warned that profits would suffer from currency problems in Nigeria. The ordinary retreated 51p to 438p and the 'A' by 48p to 421p.

APV's share slipped another 1.5p to 72.5p on news that Clive Strowger had lost his chief executive post. Similarly, Automated Security lost 5p to 83p with Tom Buffett stepping down as chairman and chief executive.

A cautious trading statement took USM-quoted Berry, Birch & Noble down by 9p to 95p.

Big fallers among the majors included Pensinsular & Oriental Steam Navigation. Price dropped 23p to 615p amid talk that James Capel was preparing a hard-hitting sell note.

BTR also suffered from an analyst's note. Shares lost 8p to 311p as James Ritchie at Morgan Stanley cut profit forecasts for BTR for this year from pounds 1.56bn to pounds 1.38bn. His prediction for 1995 has been reduced from pounds 1.76bn to pounds 1.55bn.

The downgrade reflected continued difficulty in several of BTR's markets, restructuring costs and commissioning costs on the Denver airport project.

Exco slipped a penny below its recent flotation price of 175p in the wake of the big boardroom changes announced on Monday, before recovering to 187p, up 8p on the day. Peter Edge, deputy chief executive, took advantage of the weaker price and bought 200,000 at 180p each.

Latest quarterly figures from SmithKline Beecham upset the pharmaceuticals sector. Main concern was the larger-than-expected fall in sales of Tagamet following the expiry in May of the US patent on the drug.

SmithKline slipped 6p to 429p. Glaxo shed 16.5p to 598.5p on worries about the possible tail-off in sales of Zantac when its patent expires.

Shares in British Biotechnology, though, shone out in the sector with a 15p advance to 558p amid talk of a big buyer stalking the market for stock.

Notable winners elsewhere included Unigate, ahead 3p to 343p. There was renewed speculation that it was close to selling its 30 per cent holding in Nutricia, the quoted Dutch company which produces baby foods and clinical products.

Disposal of the stake, at current stock market prices, would tip pounds 200m cash into Unigate's coffers. Some analysts said the shares were also due for a bounce following recent weakness.

Chamberlain Phipps firmed 1p to 167p on talk that Credit Lyonnais Laing was about to release a strong buy recommendation.

First-day dealings in ServisAir were respectable. Floated at 135p, the shares closed at 138p.

Trading resumed in APTA Healthcare, the former Midland Assets company.

Shares, which were suspended at 19p, finished the day at 17.5p.

Concern about the weakening dollar sent share prices tumbling. The FT-SE 100 share index closed 34.9 points down at 3,085.3 and the FT-SE 250 lost 15.7 to 3,532.3. Volume trading remained low, with only 530 million shares going through the books.

Shield Diagnostics shares, which have underperformed badly since the biotechnology group floated at 112p a year ago, bucked the trend with a 1p gain to 60p. There was talk that some buying orders from institutions cannot be fulfilled due to a shortage of stock. Allied Provincial, the regional broker, is also understood to have placed the shares high up on its buy list.

Dealings in Scantronic shares could be lively today following an after-hours announcement that warned of a pounds 2.4m half-year loss and that preference dividends were unlikely to be paid. In addition, bid talks had not yielded any meaningful proposals. Shareholders are also being tapped for pounds 1.6m of funds via an open offer at 10p per share, against the market price of 23p.

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