Market Report: Shares weaken in defiance of optimism

IT WAS as if shares wanted to prove the experts wrong yesterday. At one time they were edging ahead confidently; then three investment houses talked optimistically about stock market prospects and, as if mindful of the date, shares promptly lost their strength.

The FT-SE 100 index welcomed April, historically a strong month for the market, with a 0.3-point fall to 2,878.4 in trading still largely dominated by tax considerations.

Barclays de Zoete Wedd, James Capel and Kleinwort Benson were the trio of bulls.

Michael Hughes of BZW suggested investors should move to 'overweight'in equities because of UK recovery prospects; Robin Griffiths of Capel predicted the FT-SE 100 index would hit 3,200 by May and Kleinwort's equity team weighed in with the view that the index could challenge its peak this month.

In early trading government stocks bathed in the success of the pounds 3bn auction. But an afternoon sell-off left many down on the day.

Drug shares were back in the doldrums, with Wellcome hit by reports of problems with its anti-Aids drug, Retrovir. SmithKline Beecham's US excursion for analysts was also said to be turning bearish for Wellcome.

Irwin Lerner, chairman of Hoffman-La Roche, also contributed to the gloom by fretting about the Clinton administration introducing a tough pricing policy. The Hillary Clinton-led task force examining US healthcare reports next month.

He said drug shares would fall further if President Clinton introduced price curbs. He also forecast the rate of return of the pharmaceutical industry would fall in the short term.

Wellcome, at one time down to 735p, ended 19p down at 743p; SKB fell 4.5p to 407.5p and Glaxo Holdings 16p to 590p. Medeva, reflecting its German takeover, rose 3p to 230p.

Imperial Chemical Industries retreated 12p to 1,165p. Capel suggested first-quarter profits of pounds 180m against the pounds 212m made last time.

Hotels remained under the shadow of the Queens Moat Houses uncertainty. Forte lost 8p to 184p, partly on fears it will make a rights issue to buy hotels from QMH. Ladbroke Group lost 5p to 176p. Its enhanced share dividend came too late to have any impact.

Bass, which has trading links with QMH and could also be interested in some of the hotels, gained 9p to 555p with SG Warburg putting out a buy recommendation.

T&N, the motor components group, put on 2p to 186p. Carr Kitcat & Aitken has lifted its profit forecasts by pounds 5m to pounds 85m and by pounds 15m to pounds 115m. The group is expected soon to raise pounds 40m through a share placing. The cash is needed to pay for the first instalment on the acquisition of Goetze, a German components maker. Motor World, on the Jim Slater tip in the Independent, advanced 20p to 277p.

Power shares surged higher, largely on yield considerations. National Power's decision to pay a second interim dividend appeared to highlight the power stocks' income attractions. NP gained 8p to 346p; PowerGen, which had already announced a dividend move, rose 10p to 341p. Scottish Hydro-Electric put on 4p to 350p and Scottish Power 4p to 329p.

Some of the distributors made headway. Northern Electric, the subject of an analysts' visit, was unchanged at 534p.

The engineer BM Group ran into a wave of selling following Wednesday's disastrous figures. The shares plunged 13p to 18p. Last year they were more than 400p.

TI Group put on 6p to 305p as Mannesmann, the German group, lifted its shareholding to 7.7 per cent. It has made no secret of its desire to reach 10 per cent. Wassall was firm at 238p. Hanson, through Hoare Govett, raised pounds 14.5m by halving its stake to 4 per cent.

Lonrho, ahead of today's shareholders' meeting, rose 3p to 85p. It will be the first appearance of Dieter Bock, new joint chief executive.

Thames TV dropped 33p to 188p on the forecast provisions; Reliance, the security group, fell 24p following a profits warning.

Pilkington was chipped 9.5p to 115.5p. It was hit by switching into its new pounds 80m bond issue and by a cautious presentation by Saint-Gobain, the French glass group.

WPP, the communications group, jumped 5p to 61p as the market anticipated a successful rights take-up. The ADR rump is likely to be placed on Monday.

Harrison Industries, the building materials group, rose 1.5p to 8p. The shares have doubled since it became known on Tuesday that the Stratagem investment group had an option to buy 25 per cent. Stratagem's Bernard Kerrison has joined the board and the option will be exercised.

After scoring a 9.2-point gain the FT-SE 100 index ended down 0.3 at 2,878.4. The FT-SE 250 index slipped 0.6 to 3,107.2. Volume was 676.7 million shares with 43,519 bargains recorded. The account ends on 16 April with settlement due on 26 April.

Highland Distilleries, the Famous Grouse group, has decided to equity account its 35.4 per cent share of the Robertson & Baxter drinks group. In 1991 R&B produced profits of pounds 24.6m. For decades Highland has contented itself with the dividend income. Highland's move could be related to its relationship with the French Remy Cointreau group. Highland, interim figures on Monday, rose 13p to 282p.

Stirrings continue at Farringford, running a hotel on the Isle of Wight. David Cunningham, head of the Waterglade International property group, has become chairman, taking over from Sandy Saunders. Antonio Lotto, who has taken a pounds 500,000 convertible preference interest, has added to his equity stake and has 12.45 per cent. Sir Fred Pontin has 36.6 per cent. The shares are 8.5p.

Dealings in Holliday Chemical Group are due to start on Thursday. A strong opening is expected with some looking for 225p against the 195p placing price. There has already been a strong demand with the placing, it is believed, about 40 per cent oversubscribed. Holliday is thought to be keen to grow through takeovers, which could involve tapping shareholders for rights cash.