Market Report: Profit-takers call tune as shares' advance is halted

OF COURSE, it had to happen. After surging with seeming relentless determination to new peaks, adding more than pounds 70bn to stock market values, shares fell back as profit takers for once got the upper hand.

The FT-SE 100 index gave up 33.2 points to 3,428.8, its biggest setback for more than six weeks. Credit Lyonnais Laing could have deepened the hangover, suggesting the index will be no more than 3,600 by the end of next year.

Much of the profit taking related to squaring arbitrage positions. But there was no doubt that some investors, big and small, succumbed to the temptation to lock in some of the heady profits achieved in recent weeks.

Hopes that the index will hit 3,500 by the year-end have not, however, completely evaporated. Bulls were quick to point out that two years ago the shortened New Year's Eve session produced a 73.1- point gain as buyers caught the market on the hop. And the present squeezy conditions are similar to 1991.

In early trading it appeared that shares were going to indulge in another record-breaking run. At one time the index was up 18.8 points at a trading high of 3,480.8.

Such diverse shares as Eurotunnel and Fisons were among the leaders to buck the trend.

Eurotunnel jumped 34p to 597p, a two-day gain of 57p. The advance followed the group's 10- year extension to its Channel concession.

Fisons rose 4p to 132p, making a 19p two-day gain. Recovery hopes and the expectation of a Zeneca bid have revived the battered stock.

Zeneca, on US buying, gained 8p to 842p. Imperial Chemical Industries, its old stablemate, also attracted the Americans, gaining 11p to 802p.

SmithKline Beecham failed to respond to clearance of its Kytril nausea and vomiting drug by the US Food and Drug Administration. The shares fell 5p to 402p.

HSBC was in form, up 12p to 958p on the back of the soaraway Hong Kong market. But like other banks, it failed to hold its best level.

Granada dipped 15p to 519p, ruffled by growing fears that it could lose the battle for LWT (Holdings), off 20p at 605p.

C E Heath, the insurance broker, fell 11p to 403p after it said talks with Inchcape, down 17p at 562p, had ended.

Building materials shares were unsettled by a chartered surveyor's forecast of tougher competition, although many builders continued to benefit from expectations of higher house prices.

Fears of increased regulatory interest hit electricities.

Greycoat, the rescued property group, edged forward 1p to 19p. Its rescue rights issue enjoyed a 95.58 per cent take-up, with S G Warburg comfortably placing the 27 million rump at 18p.

Grand Metropolitan slipped 2p to 474p after it became known that Sir Allen Sheppard, chairman, had exercised options and sold 200,000 shares, realising more than pounds 300,000. His holding is now 283,000.

Suter, David Abell's mini-conglomerate, gained 5p to 187p. Acquisitions and disposals are expected in the new year. Panmure Gordon is thought to have added to the interest, producing an internal buy note.

Coal Investments, up 5p at 37.5p, continued to benefit from the turmoil in the coal industry and the faith of 29.9 per cent shareholder Nicholas Berry.

Donelson Tyson fell 1p to 14p, a surprising response to Morgan Stanley doubling its stake to 10 per cent.

The little-noticed Cheshire civil engineer recorded a sharp profit fall to pounds 439,000 in the first six months of this year.

The FT-SE 100 index retreated 33.2 points to 3,428.8 and the FT- SE 250 index 20.4 points to 3,786.6. Trading reached 554.1 million shares from 38,746 deals. The account ends today and settlement is on 10 January. Gilts were little changed.

A beneficiary of the market's strength - and of shrewd investment - is provided by the Schroder Split Level Fund. It disclosed that its capital share asset value had reached 125.1p, up from 113.9p a week ago. In July it was 80.9p. The capital shares were unmoved at 32p although the income shares rose 1p to 126.5p. The trust has almost nine years to run.