Market Report: Tiddlers still calling the bullish tune

IT WAS again a tale of two stock markets yesterday. Blue chips, as measured by the FT-SE 100 index, endured another difficult session as the second-liners and assorted tiddlers turned in another storming performance.

The two-way pull underlined the view that most leading shares are fully valued and the greater recovery potential lurks among the rest of the herd.

But the moves by Smith New Court and SG Warburg to start trading in the FT-SE 250 index also spurred enthusiasm. SNC is marketing futures contracts and Warburg has produced a series of warrants listed in Luxembourg.

In another busy session the top 100 index closed 9.5 points down at 2,816.5. The index measuring the next 250 shares jumped 21 to a new peak of 2,940.3.

But it was down among the often obscure tiddlers, the so- called third and fourth division, that the real action occurred.

The arrival of the new FT-SE smaller companies index, which started this week, is encouraging institutional shareholders to take more interest in the small fry.

There are also signs that institutions are prepared to promote action among smaller companies where they have substantial interests. Blue chips continued to feel the weight of rights issue fears, ignoring hints of lower interest rates.

British Petroleum, which remains a rights favourite, fell 2p to 236p, although bearish comments on the oil sector in the US also took their toll. Trafalgar House, another cash call candidate, added 5p to 89.5p ahead of next week's shareholders' meeting.

Among leaders BAA, the airports group, was hit by an array of downgradings. The shares fell 18p to 758p. NatWest Securities has lowered its estimate for the year starting April by pounds 15m to pounds 315m. Grand Metropolitan, down 11p to 436p, was another to encounter revised expectations.

Bass was another NatWest casualty, falling 13p to 621p as the securities house repeated its sell recommendation.

But TSB Group, as rumours of a Lloyds Bank bid resurfaced, rose 6p to 158p. Lucas Industries, up 3p at 142p, was another to feel takeover speculation.

The sharpest mover was undoubtedly Unigate, the food and transport group. Suggestions that the French BSN giant was about to pounce lifted the shares 21p. When BSN said it had no intention of bidding the speculators latched on to rumours of a management restructuring, which seemed to boil down to 80 redundancies in Wiltshire. The shares closed 19p higher at 329p.

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Pilkington, an old takeover favourite, improved 3.5p to 111p.

Owners Abroad, where bid action has broken out, put on 2p to 122p. Bidder Airtours slipped another 11p to 291p.

De La Rue, the security printers, enjoyed a Barclays de Zoete Wedd push, up 16p to 658p. Pearson, off 20p to 370p, was hit by SNC and UBS Phillips & Drew comments. Mirror Group Newspapers gained 4p to 97p on small but persistent demand.

Burton Group, after the cost- cutting announcement, ended 1.5p higher at 80p. Profit forecasts, mainly for next year, have been revised upwards. BZW moved from pounds 40m to pounds 50m and Warburg from pounds 50m to pounds 60m.

The rest of the stores sector turned in a mixed performance. But there were some strong gains among food retailers. Asda was actively traded - Seaq put turnover at 43 million shares - gaining 2p to 65p. Iceland Frozen Food spurted 24.5p to 667p.

Brake Brothers, the biggest supplier of frozen food to the catering industry, had another run, up 16p to 472p.

British Steel, 4.5p higher at 62p, responded to US buying. The engineer FKI rose 3p to 114p following a pounds 4.5m Kuwaiti contract.

The December car figures continued to inspire motor dealers, with Appleyard Group up 10p at 95p and Henlys 9p to 96p.

Burmah Castrol suffered from cautious comments from Schroders Securities and worries that it will be tempted to barge into the battle for Evode. The shares fell 22p to 710p.

Among the tiddlers Gresham House illustrated the search for recovery stocks, with a 3p gain to 10p. A month ago the shares were down to 2p and they started the year at 4p. In October it reported losses of pounds 1.5m in the first six months of last year. It has a negative asset value.

Brabant, the little oil group, slipped 1p to 27p as it expressed fears about a hostile bid from Aberdeen Petroleum.

The company said Aberdeen was holding meetings with its main shareholders and 'any proposals made at these meetings do not have the approval of Brabant's board'.

Rhino Group fell 2.5p to 24p. Blockbuster, the US operation, has cut its stake below 3 per cent.

The FT-SE 100 index, at one time down 20.5 points, ended 9.5 lower at 2,816.5, but the FT-SE 250 index rose 21 to 2,940.3, a peak. Trading remained strong with turnover reaching 755.7 million shares and 31,524 bargains recorded. In quiet trading government stocks were little changed

Invergordon Distillers recovered a 4p fall yesterday to close unchanged at 309p. The shares fell 11p on Wednesday. Nigel Popham at stockbroker Teather & Greenwood believes profits grew only pounds 1m to pounds 33m last year and will be little changed this year. He feels 1991 bidder American Brands may come back at below its earlier 275p shot and the shares are a sell.

Shares of Amber Day, the What Everyone Wants clothing retailer, reached 51p yesterday, up 5p. Sales are said to be running 15 per cent ahead, compared with a 10 per cent autumn advance. Amber has had a difficult time with Philip Green, the creator of the group, resigning as chairman and chief executive. Profits fell from pounds 10.14m to pounds 7.52m last year.