Market Report: Leading shares in retreat on wariness over the US

ANOTHER crash, another quiet day in London. Shares were hammered as market makers took fright from the near 50-point overnight fall on Wall Street and fresh evidence pointing to another rise in US interest rates.

Investors sat tight as the

FT-SE 100 share index recorded its seventh 40-plus point drop in a month. Volume trading in shares was the lowest this year at 515 million. The number of trades was also a low at 21,000.

Cassandras bearing charts were again out in force, predicting the market had further to fall. James Capel, for instance, said the FT-SE 100 would soon fall below the 2,950 benchmark before staging a 200-point rally.

Leading shares were in retreat throughout yesterday's dealings. The FT-SE 100 index opened 27.8 points lower, and closed 45.5 down at 2,956.3 after Wall Street kicked in with the Dow Jones sporting a further loss of 50 points.

Analysts' buy recommendations on several stocks went unheeded amid the market makers' lemming-like rush for the door. Genuine trading in the leading 100 shares was a paltry 223 million.

Only eight constituents of the FT-SE 100 index advanced. And several of those gains could be put down to a partial recovery following maulings earlier in the week.

The main concern in London is that the US economy is starting to overheat, and can only lead to higher interest rates. UK government stocks had a volatile session, although losses were trimmed by the close to around a quarter of a point.

Andrew Roberts, bond market analyst at UBS, said gilts had been underpinned by incoming flows of funds from Europe, especially from Germany and from a shift into government stock out of a battered equity market. 'The Footsie looks sick,' he said.

The 71 4 per cent 1998 issue finished a tick easier on the day at pounds 9531 32 , where it yields 8.6 per cent. The medium-dated 63 4 per cent 2004 closed seven ticks lower at pounds 8523 32 , for a yield of 8.9 per cent. The longer-dated 9 per cent 2008 was pounds 1 4 down at pounds 1014 32 to yield 8.85 per cent.

Trading in bullion markets was active, although prices finished the day little changed. Gold rose 25 cents to dollars 392.25, and silver added six cents to dollars 5.65. There was talk that a large US house was unable to sell a large amount of gold.

Electricity shares, however, again stood out from the crowd, with Salomon Brothers reconfirming its positive stance on the sector. The attraction of high dividend yields tempted some investors to buy water shares.

In addition, South Western Electricity, up 4p to 738p, carried on the sector's trend of buying back shares. The company bought 250,000 in the market at 734p each, taking the cumulative total over recent weeks to 6 million - equal to 4.9 per cent of the issued capital. The move followed the previous day's mammoth pounds 153m buy-back by Midlands Electricity. Its shares firmed 1p to 715p yesterday.

Gains among the waters included Anglian, 1p firmer at 516p, and Southern, ahead 7p to 545p.

Another leading share to record an advance was Commercial Union, up 3p to 497p, on the back of a strong 91 per cent take- up of its recent rights issue. The rights rump of 6.4 million shares was yesterday placed with institutions through Hoare Govett and Cazenove at 490p.

Among the top financials, TSB held steady at 217p on plans to rationalise its branch network.

Gossip was generally thin on the ground, and was mostly confined to smaller companies.

A Cohen, the engineering company, saw its ordinary climb 30p to 540p and the 'A' by 45p to 530p on enfranchisement talk. Kode International, the electronic equipment group, rose another 8p to 64p on rumours of a break-up takeover bid.

Cannon Street Investments continued to suffer, dropping to 11p at one stage in the wake of Tuesday's disappointing interim results. The price closed 1.5p down at 15.5p, making a two-day fall of 47 per cent.

Yesterday's wooden spoon for a profit warning went to British Thornton, the maker of packaging for video games. Shares slumped to 43p at one time before closing at 51p, down 24p on the day. Rhino, retailer of video games, slipped 3p to 23p.

Tie Rack eased 1p to 117p on some worries about the effect of the rail strike on its stores sited at stations.

Blenheim, the exhibitions group, fell 20p to 245p as takeover hopes faded.

Shares in Michael Page, the recruitment consultancy, moved in the opposite direction to the company's sectoral neighbours yesterday with a 3p rise to 122p. Volume trading in the stock was reasonably high at 676,000, and a string of delayed trades went through towards the close. There was talk of an institutional investor looking to build up a holding.

Parkside International, one of this year's clutch of poorly performing new issues, could be set for a shot in the arm following a visit by analysts to the company's packaging operations in Yorkshire. The company yesterday paid pounds 1.7m for a 2.6-acre greenfield site in Leeds to build a 35,000sq ft factory. Parkside's shares, floated on the market at 110p in February, stand at 86p.

The FT-SE index plunged 45.5 points to 2,956.3 on concern about the pace of growth of the American economy. A 26.1-point fall to 3,429.2 was recorded by the FT-SE 250. Volume share trading was the lowest for the year at 515 million.

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