Market Report: Little cheer at roller-coaster gilts party

A GILTS rally was disdainfully dismissed. Instead, the stock market decided to concentrate on the political uncertainties following the European 'compromise' and the possibility of a trade war between the US and Japan.

Consequently, shares had another distressing and volatile session with the FT-SE 100 index performing its now customary roller-coaster.

In early trading it plunged 46.5 points; rallied to reduce the fall to 5.7, and then capitulated in late trading, ending 31 down at 3,092.4 - the lowest since late November.

It seems incredible that it was only at the start of last month that the index peaked at 3,520.3.

Interest and inflation worries and caution over economic recovery prospects have taken their toll, gnawing away at Government stocks and shares.

It was the first time political worries had featured in the present retreat. But the market was quick to latch on to them, greeting them almost as an old friend.

Wild rumours that John Major had resigned or was holding a series of confidence- seeking meetings went the rounds. Amid the speculation, Kenneth Clarke, Chancellor, and Eddie George, Governor of the Bank of England, met, if a little behind schedule, for their monthly meeting on the economy.

Interest rates were no doubt on the agenda but there are few in the City who now expect a politically-inspired cut to be made to ease the burden of next month's tax increases.

The possibility of a US-Japan trade war sent New York crashing 63.33 points on Tuesday. While the market was open it nudged a 40-point fall, deepening the gloom.

At one time gilts scored gains of more than pounds 2 with the long gilt future closing with a three-point advance.

But in the cash market prices drifted off their best levels as US bonds came in easier, closing up to pounds 13 4 higher.

Newcomers and rights issues attracted much of the trading attention. Cash calls demanding almost pounds 220m were announced with Senior Engineering, down 8.5p to 133p, and Stakis, the leisure group, off 1p to 84p, as they each announced pounds 67m issues. Simon Engineering's well- flagged pounds 52.5m call left the shares 3p off at 118.5p.

Of the debutants, Capital Shopping Centres suffered the predictable humiliation, trading at 208p against a 230p sale price. Robert Fleming Securities undertook a supportive 'stabilisation' programme. Seaq put turnover at 4.3 million; so any Fleming back-up was fairly subdued.

Inspec was the star of the quartet, ending at 185p against a 170p placing; Wainhomes, offered at 160p, touched 167.5p and ended at 164p, and Nottingham Group closed at 156.5p from the 155p issue. Because of the market's volatility the Rugby property group put off fixing its issue price until today.

Stores attracted attention. Lehman Brothers and Kleinwort Benson gave Kingfisher a helping hand, suggesting the shares, after recent weakness, were a buy. They rose 12p to 567p.

Hopes of a share buyback or property flotation lifted Great Universal Stores 10p to 591p.

Granada was firm at 550p ahead of a suspected buy note; the spectacle of Wimbledon overwhelming Blackburn Rovers had the predictable impact on Manchester Utd, up 31p to 680p.

British Aerospace wobbled 13p to 488p as worries surfaced about its leasing commitments. Overseas investors have fallen below the 25.5 per cent ceiling.

Westland, the helicopter group, hovered 8p higher to 333p; GKN, down 10p at 537p, increased its offer and picked up enough shares to go above 50 per cent.

Allied-Lyons, raising pounds 651m for the acquisition of the Spanish drinks group Pedro Domecq, slipped 4p to 553p with the nil-paid rights at 48p.

Interest in the rights is growing because of the potentially wide gap between the two payments. The first instalment of 245p is due next month, but the second payment of 245p could be delayed at least until the end of the year.

The Domecq takeover requires European Union consent. There are hopes it will come through in a few months but Allied has structured the rights so it can wait until November for approval.

Insuance shares were ruffled by the Norwich Union decision to re-train its sales force. Legal & General fell 15p to 464p and Commercial Union 9p to 571p.

Rank Organisation's decision to close its loss-making US video distribution arm left the shares 6p down at 395p.

The subdued crude price following the Opec production standstill continued to weigh heavily on British Petroleum, off 7.5p to 349p.

Most utilities were downcast. Yorkshire Electricity, meeting analysts, fell 4p to 638p.

Embassy Property returns today, following management changes, a restructuring, a pounds 15.2m placing and open offer and property acquisitions in Britain and China. Some look for an opening price of 2p against the 1p placing.

The long-running despute about the ownership of a 13 per cent interest in Bristol Scotts, the leisure and property group, is expected to go before the courts in June. The company, which has raised pounds 3.9m by selling a relatively small part of its Bristol property, is planning to sell its famous Scotts restaurant in Mayfair. The shares held at 123p.

Entrepreneur David Williams has emerged at Dunton, a brickmaking and property group where rumours of a revamp have circulated. Trusts associated with Mr. Williams have taken an interest and Dunton's directors have enlarged their shareholdings. A restructuring, including sales and a pounds 760,000 cash call, will leave Dunton ready for expansion.

The FT-SE 100 index had another erratic session, ending 31 points down at 3,092.4; the supporting FT-SE 250 index fell 21.7 to 3,767.1. Turnover was 765.4 million with 46,370 deals. The account ends on 8 April with settlement on 18 April.