Market Report: New man at Royal & Sun gives insurance sector a fresh look

Robert V Mendelsohn must be feeling pretty pleased with himself. A few days ago he was the relatively unknown chief executive of Royal & Sun Alliance's US operations. Now he's being hailed as the saviour of the British insurance industry.

News of his appointment as chief executive of the composite insurer, announced after the market closed on Tuesday, pushed Royal & Sun shares up 27p to 587p yesterday - the biggest rise in the Footsie. He replaces former bosses Richard Gamble and Roger Taylor, who oversaw the merger but are believed to have fallen out over strategy.

The Mendelsohn effect did not end with his employer, though. Analysts at merchant bank Goldman Sachs reckon Mr Mendelsohn's appointment will help change investors' view of the entire sector, which it thinks looks cheap relative to competitors in the US and continental Europe. The bank reiterated its "trading buy" on GRE, which put on 4p to 307p.

But the new mood failed to lift General Accident, down 24p to 1035p or Commercial Union, 3p lighter at 845p.

Trading was generally quiet. After opening up 10.5 points Footsie eventually ended the day 6.9 points lighter at 4970.7.

Second-line stocks were up, though, helped by demand for information technology shares. FTSE International, which allocates firms into sectors, announced plans on Tuesday to create a sub-sector for the industry. Until now, IT firms have been lumped together with a whole host of unrelated businesses in the catch-all Support Services sector.

Hopes that a separate sector would stimulate interest from investors boosted IT contractors Sema and CMG, which put on 70.5p to 1,407.5p and 47.5p to 1,400p respectively. Accounting software group Sage, another likely member, gained 43p to close at 807.5p. Shares in computer chip designer Videologic continued their slide after Tuesday's disappointing results, though, giving up another 7p to finish at 44p.

News of bid talks at Holliday Chemicals, up 41.5p to 236.5p, sparked a wave of speculative buying in other speciality chemicals stocks. Leading the charge were Inspec, 10.5p dearer at 229.5p, and Croda, up 16.5p to 385p.

Another familiar bid story doing the rounds was Greenalls. The pub and hotel operator's shares gained another 18.5p to close at 406p. Just a few weeks ago they touched a five-year low of 315p. All the major pub groups, led by Whitbread, down 7p at 843p, are suggested as possible predators, but the company is not believed to be in bid talks at the moment.

A statement from Hambros, five minutes before the market closed, that it is talking to a "number of companies" about selling all or part of the merchant bank came too late to lift its shares. They closed down 1.5p at 265.5p, having touched 276.5 earlier in the day.

A hostile bid for troubled printing group Watmoughs from Canadian rival Quebecor Printing lifted the shares 90p to 287.5p - above the 275p offer price. As recently as March, they stood at 446p. Die cast maker Morris Ashby, up 7p to 397.5p, confirmed a 400p-a-share agreed bid from venture capital-backed buyer Automotive Components Investments.

Over on AIM, Stanford Rook recovered from its all-time low of 87.5p to finish at 96p. The biotech tiddler has been out of favour since October, when clinical trials showed its treatment for tuberculosis was no better than existing drugs. Results of phase two trails for a hay fever drug are expected before Christmas.

Of course, the day would not be complete without a few profit warnings. Publishing group VCI had the dubious distinction of producing the largest fall of the day. The shares plunged 77p to 115.5p after the firm warned that the early weeks of Christmas trading were below expectations, and that 1997 profits would be less than in previous years. A similar statement from shoe leather supplier Pittards booted its shares down 16p to 53.5p.

Great Universal Stores gave up 30p to 685p. Half-year figures from the mail order giant, due out today, are expected to be hit by the strong pound and the weakness of the agency mail order market.