Market Report: Shares steam ahead despite rail strike

SHARES scored their biggest gain for six weeks as a wave of buying sent the FT-SE 100 index back above 3,000 points.

The sudden enthusiasm, with many dealers sidelined by the fifth one-day rail strike, caught the stock market, expecting an uneventful session, on the wrong foot.

For once the gains were not entirely the product of defensive mark-ups. There were signs of institutional interest with turnover above 700 million for the first time this month.

Footsie gained 41.4 points to 3,005.3 with the latest round of Whitehall statistics encouraging investors. A firmer dollar, good US inflation figures and a steady New York performance added to the excitement.

The Whitehall figures - on inflation, wage increases and unemployment - came as a bonus to the market bulls who have been astonished that shares have wilted so badly despite increasing evidence that the economic revival is gathering pace. The statistics were also seen as reducing pressure for any early interest rate increase.

A modest German reduction also helped to underline the Government's strengthening interest rate position.

The impact of the dollar's battering and the consequent worries about US interest rates are never far below the surface.

Nicholas Knight, the Nomura strategist, is convinced shares face an uncertain time and talks darkly about an 'emerging sterling crisis'.

But the view among many City strategists is that after a dire first half-year, shares will perk up in the second six months.

Forecasts of a year-end Footsie of 3,400 or 3,500 have wide support although the bears, such as Mr Knight and Robin Aspinall of Panmure Gordon, are looking for about 2,800.

Most blue chips moved ahead with double-figure gains occurring throughout the list.

Pearson, the banking and publishing group, rose 11p to 599p as Goldman Sachs, the US investment house, produced a positive 50-page review.

Interim profits, due in September, are expected to be up 46 per cent to pounds 63m. For the year, analysts Neil Blackley and Guy Lamming look for pounds 245m, improving to pounds 287m in the following year.

The group's stake in BSkyB, the satellite television service, is valued at pounds 3.7bn, worth 105p a share.

Guinness edged forward 3p to 438p as NatWest Securities hosted an investment presentation for 65 investors. The meeting underlined that the group was on course for modest growth this year. NatWest is holding its forecast at pounds 936m.

Allied-Lyons moved forward 4p to 553p on rumoured Cazenove support and Bass, owner of the Holiday Inn hotel chain, was encouraged by strong second- quarter growth by the US Hilton hotels. The shares gained 9p to 530p.

British Steel moved further ahead, up 3.5p to 155p. Paul Ruddle at NatWest has lifted his forecasts from pounds 270m to pounds 400m and from pounds 454m to pounds 630m. Albert E Sharp is not quite so enthusiastic. Analysts Tim Bennett and David Larkam are going for pounds 320m and pounds 485m.

Courtaulds, the chemical group, gained 6p to 501p. Analysts are visiting its operations in Germany.

Oils flared again as the crude price advanced on the Nigerian oil workers' strike. British Petroleum jumped 11p to 395.5p and Shell 6.5p to 701p.

BAA, on the 9.1 per cent increase in June passengers, rose 20p to 948p, in turn lifting British Airways 10p to 426p. The traffic return was also good for Alpha Airports, up 8p to 164p.

Castle Communications, a video group, jumped 58p to 335p as a sharp price increase (about 40p) prompted a statement that takeover talks were under way.

Control Techniques, an electronic group, fell 9p to 394p, a reaction to the ending of a standstill agreement with Emerson, a US group.

The Americans are now free to lift their 29.37 per cent interest or bid for Control. They can also sell, a move the market seems inclined to expect.

Wembley held at 10.5p. The group confirmed that talks were on with 'various investment groups'.

An injection, leading to heavy dilution, seems likely. Impresario Harvey Goldsmith is regarded as the favourite to move to support the struggling stadium.

Shield Diagnostics gained 12p to 58p, rallying after disappointing figures.

Betterware, the door-to-door selling group, is under pressure again. The shares fell 11p to 86p, a far cry from the 278p hit last year and the 230p at which shares were placed a year ago. Profit downgradings did the damage. Albert E Sharp, the company broker, is looking for pounds 12.2m and NatWest Securities is expected to cut from pounds 15m to a similar level.

Account trading may be dead after tomorrow but stockbrokers are making arrangements for account-style operations under rolling settlement. Gall & Eke, operating the Sharemarket service, has arranged for investors to roll over each 10-day settlement for another 10 days. It has also fixed up 25-day settlement, providing its own nominee company is used.

The FT-SE 100 index jumped 41.4 points to 3,005.3 and the supporting FT-SE 250 index 27.8 to 3,493.7. Turnover was 720.8 million with 24,055 bargains registered. The account ends on Friday with settlement on 25 July. Government stocks were firm.

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