Market Report: Financials savaged by wary bears

BEARISH ANALYSTS savaged financial shares, killing any hopes the market may have nursed of making headway. Royal Bank of Scotland tumbled 61p to 827p - Morgan Stanley caution was credited with the fall - and Lloyds TSB lost 28p to 780p as Credit Lyonnais described the shares as a sell on valuation grounds.

Halifax suffered from HSBC comments that the former building society was the most expensive share in the banking sector, and Bank of Scotland was hit by BT Alex.Brown. Despite HSBC's valuation Halifax, after falling 30p, ended 7p higher at 852p as the market decided to dwell upon the possibility of corporate action.

Barclays, off 30p at 1,205p, was dragged back into the Halifax equation after weekend reports they were in talks. Prudential Corporation, another Halifax candidate, fell 16p to 813p on analytical distress after last week's disappointing out-turn from Royal & SunAlliance. CGU, third-quarter figures tomorrow, ended 22p (after 60p) down at 898p. Royal lost 8p at 493p.

The cautious stance - described as "neutral" - adopted by Morgan Stanley surprised the market. The US investment house has long been enthusiastic about the banking sector. National Westminster, down 25p at 960p, was another of its targets; so was Standard Chartered, which fell 28.5p to 610.5p.

Footsie, off 91.9 points just before the market closed, experienced a late flurry, ending 57.1 down at 5,433.9. Trading was lacklustre. Supporting shares also gave ground, with the mid cap off 7.2 and the small cap, 0.3.

Analysts also took shots at Rentokil Initial, the environmental group, with CSFB repeating its sell advice and lowering the shares 14p to 373p. But engineer Siebe shrugged off HSBC unease, heading the Footsie leader board with a 14p gain to 223p.

British Airways offered the expected low-flying performance but ended unchanged at 405p after at one point falling 17p. LucasVarity was little changed at 208p, following an early 14.5p fall. The shareholder rejection of the proposed US move provoked busy trading.

Somerfield, up 23.5p to 448.5p, continued to benefit from Friday's meetings with analysts, and Iceland, ahead of meetings, improved 11.5p to 215.5p.

Chemicals were given a whirl following the merger of Switzerland's Ciba Speciality Chemicals and Clariant. Imperial Chemical Industries added 9p to 599p and Laporte 4.5p to 556p, although few thought the Swiss deal would prompt further corporate action.

Takeover rumours caused flutters of excitement. Blacks Leisure, the sporting retailer, rose 17.5p to 254p; a 320p offer was the popular guess. Save, the petrol retailer, was given another nudge, up 9p to 79p, in busy trading.

Allied Carpets rolled 8p ahead to 54.5p as the market waited in vain for details of the signalled takeover bid. Worries about trading at Liberty, the Regent Street store, lowered the shares 25p to 155p; they were 442.5p two years ago. Marks & Spencer strengthened 8p to 418p as the succession battle intensified.

Talk of bids and deals stirred Rank, the leisure group. John Garrett, former head of the group's leisure division, seems to have acquired the backing for a pounds 900m shot at recapturing his old empire. Others are known to be circling the cinemas to pubs operation, which ended little changed at 264p.

Enterprise Oil rose 17p to 402p. It is expected to announce positive drilling results soon. Updates are expected on developments in the US, Italy and Australia. BT Alex.Brown estimates that around 30p could be added to Enterprise's net asset value, now 554p a share.

Pilkington, the glass struggler, added 3p to 77.5p in active trading. Franklin Resources, the US fund manager, took its stake to 15 per cent. Oechsle, a German investment group, has nearly 3 per cent.

Ladbroke, with a trading statement due on Thursday, slipped 7p to 229p, and department store chain Debenhams ran into renewed profit-taking, off 10.5p to 377.5p.

Computer shares had an uneasy session. Micro Focus, 9p to 121p, lost further strength following its disappointing trading statement and Admiral fell 55p to 990p. CMG softened 55p to 1,525p.

Churchill China was the day's worst performer: the shares were smashed 30p to 87.5p after the third profits warning in six months. William de Broe cut its year's profits forecast from pounds 3m to pounds 1.8m. Last year the shares were 715p.

Storedata Solutions fell 0.5p to 3.5p. A cautious trading statement was accompanied by predictions of a significant acquisition. Jourdan held at 44.5p. Chairman David Abell has raised his shareholding to 15.2 per cent, buying 450,000 shares.

SEAQ VOLUME: 706.7 million

SEAQ TRADES: 64,366

GILT INDEX: 110.85 +0.35

BICC, the cable and construction group around which swirl rumours of corporate action, put on 2p to 56p in keen trading after a meeting with analysts at its Mayfair headquarters.

It would appear that chief executive Alan Jones wants to hold on to the construction division but may be tempted to offload the cables side. After poor figures last month BICC shares fell to a 38p low.

EMERALD ENERGY fell 1.25p to 6p after a mixed report on its Colombian drilling, with "apparent inconsistencies" at the Gigante 1A well. A review is under way, but the well is regarded as a production unit and the rig is being moved.

Nearly 20 million shares were traded, putting little Emerald just behind British Petroleum as the day's most heavily-traded share.