A heavy week leaves dealers with a case of the jitters

MARKET REPORT

Suddenly it all seemed too much. A week when shares stretched to new peaks ended on a subdued note with the FT-SE 100 index off 27.2 points at 3,551.4 in ragged trading.

At first it looked as though Thursday's weakness had been a temporary aberration as the index moved to within a few points of its all-time high.

But the expiration of the October futures contract, rather strangely, took the shine off the proceedings and shares turned decidedly jittery.

There was no wave of selling but some investors decided to lock in at least a little of the profits they have achieved in the bull run.

Of course if the rumoured mega-takeover bid had appeared the market would have been in much more robust form. But takeover activity was conspicuous by its absence and even the widely forecast strike for Gartmore, the fund manager, failed to materialise.

Mercury Asset Management, the ex-Warburg investment arm which is regarded as a bid target, added to the caution by cutting its shareholding in one of the top takeover candidates, Royal Bank of Scotland.

MAM has reduced from almost 15 per cent to 12.8 per cent, prompting thoughts that the investment house is not convinced that corporate activity looms.

The current round of merger activity and the rip-roaring progress of the market has prompted many fund managers, although twitchy, to resist the temptation to cash in. However MAM's retreat from RBS was seen as an indication that it was not convinced by the bid talk and was bravely prepared to take a chance and risk the blushes any strike would bring. RBS shares took the MAM sale poorly, falling 19p to 529p.

But it would be wrong to assume that the merger mania will disappear. Many took the view that the past two days, which have clipped Footsie by 41.6 points, were merely a pause for breath.

They expect shares to resume their advance, with or without mega bid(s), pointing to the wall of money already produced by the takeover spree and the likelihood of interest rate and tax cuts.

Merrill Lynch, the US investment house, is among the bulls; it let it be known it expects a correction - but not before Footsie reaches 3,700.

There is a belief the market should continue to push ahead until the spring, when it will start to come under the shadow of the next election.

Despite the lack of takeover spin yesterday some brave souls were still chasing bid stories. One of the most unlikely was a bid by drought-stricken Yorkshire Water for its electricity namesake.

It was enough to lift Yorkshire Electricity, which this week announced a hand-out package to keep the takeover wolf at bay, 6p to 905p. Yorkshire Water rose 6p to 646p.

And hope springs eternal at health-care group Smith & Nephew. After Thursday's fall, when the long-rumoured bidder Johnson & Johnson found another target, the shares rallied 2.5p to 191p.

Hard-pressed Cray Electronics was another to see some bid light, with a 3.5p gain to 47.5p. The shares, after a dismal trading performance, have crashed and the feeling persists that, perhaps, a predator could pounce before any recovery becomes evident. In the sort of twist the market loves Racal Electronics, regarded as a Cray target before the stumble, is said to be looking closely at the group.

Ibstock, the brickmaker, held at 66p as 19 million shares were crossed at 65p. But the nation's largest brickmaker, Hanson, had another depressing time. The shares drifted 5.25p down to 193.5p, the lowest for three years.

Supermarkets were hit as price war fears again took their toll. Asda, buying control of the George Davis clothing business, fell 2.75p to 96.5p and Tesco 5.5p to 302p. J Sainsbury lost 15p to 408p.

Forth Ports had another good session. The shares rose 28p to 615p after Barclays de Zoete Wedd made confident noises about its recent expansion, which has netted the Scottish group two more ports. The company was privatised in March 1992 at 110p.

SmithKline Beecham improved 8p to 652.5p following some bullish drug industry comments in the US. Figures are due next week. Other drugs were firm, including British Biotech up 46p at 883p and Medeva 10p at 286p.

Profit warnings were again a telling influence. Holmes & Marchant, a marketing group, slumped 5.25p to 6.75p and Surrey, a bookie, gave up 0.25p to 1p. The profit setback hit Ferguson International, a packaging group, 25p to 343p.

TAKING STOCK

rEx-Lands has been a disappointing performer since brothers Robert and Graham Bourne, who sold their Local London property business at the top of the market, moved in five years ago. The shares edged ahead to 24.5p against more than 50p at the start of the 1990s. There is talk of corporate action. One suggestion is that the group's Continental golf operation, embracing five courses, will be floated as a separate company. Profits, due next month, are likely to be a little below last year's pounds 1.3m.

rRoxspur, a maker of playground equipment, held at 7p against the 17p placing in March to help fund the pounds 27.6m acquisition of the much larger Wills, a measuring equipment group. Figures are due and there are worries they will show merger expectations have not been met.

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