Market Report: Slide makes case for overhaul of computer system

THE STOCK market yesterday suffered its biggest one-day fall since the black days of the crash of 1987.

The FT-SE share index collapsed 103.4 points to 2,446.3. The remnant of the devaluation gain is now 68.

The disarray in the Tory ranks, the economic policy vacuum and the continued weakness of sterling combined to drive the market to near distraction.

There were even fears that the once hoped-for 1-point Tory conference interest rate cut will actually become a 1-point increase.

The latest Black Monday was not, however, a London phenomenon. European markets were weak and New York opened in clear distress with the Dow Jones average at one time down more than 100 points.

Indeed, London's discomfort was compounded by the actions of a leading US securities house in the futures market just ahead of the New York opening.

Trading in the cash market was surprisingly thin. A 100-plus points crash, which wiped pounds 19.2bn from market values, was achieved on turnover of only 477.6 million shares and 22,892 bargains. Such a display makes veterans blink in astonishment.

'I've done so little business I don't know why I bothered to get out of bed,' one dealer said. Another complained about the difficulty of dealing within the confines of the computerised system. 'Futures, for all its deficiences, is the only trade- driven market,' he said.

The low trading level indicates that much of the slump was the result of market-makers taking defensive action and lowering prices.

Certainly the collapse should strengthen the clamour for a reform of the computerised system. Although it was designed to improve the market's transparency it has given too much power to market-makers and generated a volatility that, as the latest episode demonstrates, discourages dealing.

During the afternoon session a fast market was declared - prompted by a computer fault, not any dealing rush.

Not so long ago a Hanson takeover bid - the pounds 781m shot for Ranks Hovis McDougall - coming on the heels of a dawn raid would have had the market tingling with excitement. But, apart from a little activity among the food manufacturers, the long-awaited Hanson move had little impact.

RHM shares, firm last week, jumped 66p to 241p in busy trading. Its big rival, Associated British Foods, put on 9p to 409p on a suspicion that Hanson will close many of RMH's bakeries if it wins. Hanson fell 5.5p to 202p.

Trafalgar House, the recipient of a Hongkong Land dawn raid and tender offer, slipped 1.5p lower to 84p with the 'A' shares down 1.5p to 80p.

Lucas Industries eased 1p to 86p. There is a feeling it could be the next fallen star to attract a bid. The engineer Siebe, down 6p at 335p, is the favourite to pounce.

Insurance shares were weak on the Dutch air crash. Commercial Union, with extensive interests in the Netherlands, fell 39p to 497p.

Few blue chips avoided the carnage. Imperial Chemical Industries retreated 29p to 1,070p, British Petroleum 9.5p to 211p, Grand Metropolitan 24p to 360p and Lloyds Bank 22p to 422p.

Among the more spectacular falls were Euro Disney, down 60p to 760p and only 53p above the flotation price, and The Highland Distilleries Co, a lightly-traded share, 27p at 191p.

Eurotunnel tumbled 62p to 358p on the delayed tunnel opening and fears of a cash call.

Racal Electronics was one to edge forward, gaining 2p to 131p. Chubb, finally cut free and quoted, lost 14p to 187p.

Owners Abroad, where takeover speculation has swirled, ignored the gloom, gaining 1.5p to 71p. An overseas bidder is said to lurk.

The builder William Sindall jumped 25p to 98p. It has won a court action against Cambridgeshire County Council. In its latest accounts Sindall included provisions totalling pounds 4.67m.

Ramco Oil Services rose another 15p to 66p. The shares have jumped 30p since it announced on Friday it had won approval to develop an oil field in the south Caspian Sea.

Another current high flyer to ignore the bloodbath was Proteus International, the computer drugs designer. It gained 28p to 413p. Aegis, the hard-pressed media buying group, fell 5p to 17p. It is withdrawing its Nasdaq and Paris listings.

The steel stockholder GM Firth fell 3p to 8p as losses deepened. Arthur Lee, a plastic and steel group, gained 5p to 91p on hopes that Firth will be forced to sell its 22.76 per cent stake. The Carlco engineering group has 7.97 per cent of Lee.

Shares crashed yesterday. The FT-SE 100-share index slumped 103.4 points to 2,446.3. The FT 30-share index lost 73.1 to 1,779.4. Turnover was only 477.6 million, with 22,892 bargains. Government stocks had a torrid session. At one time down more than two points, they recovered to close up to pounds 3/4 lower

The outlook for Porter Chadburn, the leisure goods and US packaging group, improved following the sale of the loss- making Gola footwear business. But the exceptional loss suffered on Gola has prompted the stockbroker Albert E Sharp to revise its forecast for the year to March from a pounds 5.5m profit to pounds 1m loss. The shares held at 30p against a 65p peak for the year.

Buy recommendations had little impact yesterday. So Blenheim, the exhibitions group, responded to favourable comment from Greig Middleton with a 10p fall to 500p. The group is changing its accounting period and analyst Ian Berry forecasts profits of pounds 36.5m for the year ending August with pounds 47.5m over the current 16-month period. For next year he expects a pounds 47.5m repeat.