Market Report: Fears grow that bull run is over

BLUE CHIPS struggled from their lowest levels but fears are growing the long bull run is over or, at the very least, the stock market is undergoing a severe correction.

Footsie has now fallen on five consecutive trading days, a setback not experienced since the Asian crisis erupted in October. Then it lost 470.5 points; this time round the decline is 322.1.

Asia and the strong pound were largely responsible for yesterday's weakness. But trading activity was reduced by England's World Cup opener in Marseilles, which filled the bars and drained dealing rooms, and London's tube strike.

Another poor display by Far Eastern markets and the continuing slide of the Japanese yen ensured shares made a subdued start. Then it became apparent sterling was in rampant form, making yet another devastating surge. At one time Footsie was off 123.7; it closed, helped by narrowing losses in New York and, just perhaps, the result from Marseilles, down 54.1 at 5,715.7, lowest since February.

Mid and small cap shares suffered their heaviest falls in the current downturn. The mid cap index lost 111.2 to 5,750 and the small cap 25.2 to 2,730.8.

Footsie is 390.1 below the peak hit in April; the mid cap achieved a 5,966.6 high last week and the small cap's record of 2,792.7 was reached in May.

National Grid, displaying interest in the up-for-sale air traffic control arm of the Civil Aviation Authority, was the best performing Footsie constituent, gaining 15.75p to 374.75p

Tesco, in delayed response to analyst buy notes and in recognition of its defensive qualities in stressful times, rose 17p to 554.5p, and British Steel, holding its dividend despite sterling-ravaged figures, hardened 4p to 138.5p.

Thames Water and ScottishPower also scored on their defensive merits.

BT, reflecting Friday's European strategy conference, added 10.5p to 653.5p. BT Alex.Brown put an 800p price tag on the shares and SBC Warburg moved from 700p to 780p. Lehman Brothers was more bearish, suggesting 630p was "fair value".

Asda, moving into fast food with a plan to open 60 drive-through restaurants, firmed 0.5p to 192p.

Marks & Spencer, rumoured in the textile trade to have suffered one of its worst-ever run of clothing returns, ended 5p down at 532p.

Mirror, the newspaper group, tumbled 24.5p to 208.5p as German group Axel Springer Verlag backed away from bidding. Vaux, the Sunderland brewer and hotel owner, held at 316.5p after falling sharply on Friday when the still unidentified suitor, thought to be Stakis, decided not to bid. Talk that Whitbread could be interested in Vaux's Swallow Hotels chain helped prop up the shares.

Arriva added to the forecourt gloom. Following Car Group's surprise warning on Friday, Arriva, the old Cowie, skidded 70p to 372p after warning profits would not reach market expectations, around pounds 110m. The group intends to hive off its car leasing arm to concentrate on buses and motors. The Arriva reverse made further inroads into car shares. Lex lost 47.5p to 534.5p and Avis Europe 19p to 263.5p.

Engineer Weir was weighed down by the suspicion that a line of stock hovers, falling 18.5p to 235.5p. Cable & Wireless was another under the influence of a stock overhang. It also had to contend with worries over its Telecom Italia and US internet deals as well as the sharp fall in the Hong Kong market. Dresdner Kleinwort Benson weighed in with sell advice and the shares ended at 656p, off 15p.

Newcomers managed to pierce the gloom. JSB Software Technology, placed at 200p, closed at 235p, and ATA, a recruitment group ended at 147.5p from a 134p placing.

Standford Rook, a drugs tiddler which has had an erratic time, rose 16p to 99.5p after reporting upbeat results from trials of its tuberculosis treatment. The shares, briefly, touched 635p on hopes it had achieved a major breakthrough with its TB treatment. But subsequent developments were disappointing, sending the shares crashing to 79.5p.

Springwood, the leisure group run by Adam Page, rose 19p to 151.5p following tipsheet comments, and the Queensborough leisure group responded to buying by Channel Hotels & Properties with a 2.25p gain to 29p.

Takeover speculation lifted Powerscreen, the hard-pressed engineer, 21p to 121.5p. Calluna edged ahead 1p to 30.75p as speculation on internet gossip pages suggested it was on the verge of winning a major contract, presumably for its Hardwall computer security system. A variety of rumours have flowed linking Calluna with the Ministry of Defence and IBM, as well as the US authorities. The shares have climbed from 8.5p this year and have brushed 45p.

Reece held at 2.25p as stockbroker Teather & Greenwood suggested the shares were "worth speculatively accumulating". It suggests the company is set to become more focused as its days as a mini conglomerate end. It is likely to concentrate on its manufacturing business, selling its distribution side. Britannia, the construction group, has 20 per cent.