Market Report: Shield Diagnostics shares rise as rumours link it with Abbott

Dealers were yesterday taking the pulse of Shield Diagnostics, the biotechnology company developing Activated Factor Twelve (AFT), a test for heart disease.

Lawyers are believed to be finalising a deal for the commercialisation of the test, which Shield may announce at its results next month. Market sources are betting that the partner for the deal will be Abbott Laboratories, the Chicago-based group, with which Shield has been involved in the past. There is a rumour that Abbott may take a stake in Shield as part of the venture. Shield's shares shot up 12.5p to 697.5p.

The diagnostic test will, Shield hopes, provide an alternative to cholesterol testing as a means of detecting susceptibility to heart attacks. Moreover, analysts reckon the test could eventually be used to measure the risk of someone having a stroke.

It would not be a surprise to see Shield teaming up with Abbott, which has around 40 per cent of the diagnostics market. Gordon Hall, Shield's erstwhile managing director who has stayed on as an adviser, used to work at Abbott.

Shield's shares plummeted last month after he announced his unexpected resignation. A partnership with Abbott would revive the stock, but, as diagnostics experts point out, it would be at least a year before the test could be sold into the market in a big way.

The insurance sector is beginning to overboil. The likes of Commercial Union have been having a field day during the past week, but the situation seemed to have taken a turn for the worse yesterday. CU was one of the least-wanted blue chips, down 37p to 815p, after HSBC James Capel said it was looking pricey if a bid failed to materialise. It dragged other former favourites in its wake. Prudential Corporation dropped 20p to 638p and GRE shed 16.75p to 285p.

During the past week in particular, UK insurers have been given a boost by corporate activity in continental Europe. BAT Industries' financial services arm merged with Zurich Insurance last month, and now a bid battle for the French group, AGF, is titillating the sector. However, despite Capel's bearish stance, other analysts say the UK stocks look undervalued.

A minority of insurance stocks did manage to buck yesterday's downward trend. The Independent Insurance Group improved by 37.5p to pounds 10.90, and preferred bid target London & Manchester Group climbed 8p to 509p.

Fears of an interest rate rise in advance of next week's Monetary Policy Committee meeting drove the pound higher and caused grief for exporters. Comments to the Treasury Select Committee by the Governor of the Bank of England, Eddie George, also pushed sterling up. Smiths Industries eased 24p to 774p, and GKN shed 14p to pounds 12.87. Interest rate-related worries also saw retailers left on the shelf. Dixons closed 21.5p poorer at 673.5p and Great Universal Stores tumbled 15p to 695p ahead of results next week. Talk of a Nat West downgrade of the sector also did not help matters.

Footsie was in the doldrums all day yesterday, and refused to be revived by Wall Street. It closed at a low for the day of 4831.8, down 57.2 points, and it didn't once manage to cross the 4990 barrier.

Mining lost its mettle, with Billiton down 2.5p to 146p, and Rio Tinto dropping 19p to 715p. Weak metal prices were blamed for the decline.

Laura Ashley found itself out of fashion too. It dropped to an all-time low, easing 4p to 41.5p, after the house broker, Dresdner Kleinwort Benson, reportedly upped its losses forecast for the year to January 1998. Ann Iverson, who was ousted as chief executive earlier this month, had been expanding into North America. But that strategy was overturned after she was replaced by David Hoare, formerly chief operating officer.

Viglen Technology, the computer group which was previously part of Amstrad, was another third line casualty. The company warned at its annual general meeting that margins would continue to be eroded as PC prices were forced down. It shares closed 22.5p down at 50p.

Intelek, the electronics manufacturer, saw its shares jump 3.75p to 15.75p after an upbeat statement on its order book.