Blue Circle stands firm amid Wall St collateral damage

Market Report

BLUE CIRCLE was as solid as cement yesterday after a buyers' scramble saved it from the market collapse. The building materials producer was part of a handful of stocks left standing while all around them crumbled in a Wall Street-inspired correction.

At the end of a tough day, Blue Circle boasted a 12.5p rise to 422.5p, very close to its 12-month peak. The rise was due to a mixture of brokers' optimism and old-fashioned speculation of corporate action. The WestLB Panmure analyst, Robin Hardy, gave the stock a push in the morning, advising his clients to buy. The sector expert went to the US to see a couple of Blue Circle's rivals and realised that Britain's largest cement producer was set to benefit from a demand explosion in the US.

Mr Hardy believes that demand and prices for US cement are set to rise as a multi-billion dollar road-building programme kicks in. Trading in the stock was spiced up by the presence of four institutions keen to get their hands on Blue Circle. The hungry buyers were faced by a lack of sellers and chased the stock higher for most of the day.

But the market is rarely happy with a simple explanation for a movement, and old rumours of a Blue Circle takeover of rival Hanson, down just 2p at 586.5p, were defrosted. The deal was thought unlikely but not impossible, especially if consolidation in the rest of the industry picks up.

Rugby, up 2.5p to 118.5p, was again in the bid frame amid new rumours that a bidder was having a look. RMC, down 42p to 790p on rate rise worries, was mentioned.

The rest of the market went into free fall amid growing fears that the US central bankers might hike rates or at least move to a tightening bias tomorrow. Wall Street provided little help, posting the expected sharp fall in the London afternoon.

The FTSE 100 shed 134.6 points to fall through the 6,200 barrier and end at 6,165.8. Turnover was the lowest since the start of the year, a worrying sign for some of the bears. They pointed out that some big sellers stayed in their tents and might come out in force if US rates go up.

More optimistic watchers said the market was oversold and would bounce back if the US monetary policy remained unchanged. The second liners followed the trend, with the FTSE 250 falling 62.4 to 5,701.2 and the Small Cap ending 17.8 down at 2,563.3.

Financials and drugs took a pasting. Insurers and banks paid for the interest-rate jitters and US bond market weakness. The illiquid Schroders was worst-performing blue-chip, losing 145p to 1,264p. Standard Chartered shed 49p to 978p as authorities in Singapore, where Standard is strong, invited rivals to enter the market. Halifax, down 31.5p to 770p, completed the rout.

Royal Bank of Scotland outperformed, ending only 1p lower at 1,323p. Talk of a tie-up with Barclays, down 68p to 1,724p, is still around. Allied Zurich flew the white flag for insurers; the stock was unsettled by volatile markets and fell 54.5p to 714.5p. Prudential followed, losing 35p to 847p. Legal & General was the insurers' exception, shedding just 6.5p to 168p in heavy volume as Lloyds TSB, down 42p to 842p, remained the mooted bidder. CGU also bucked the trend and rose 12.5p to 912p on an ABN Amro "buy".

Glaxo was on a low after a lukewarm trading statement; it bled 61p to 1,735p after posting a 2 per cent rise in the past four months, well below its double-digit growth target for the year. Arch-rival SmithKline Beecham fell 30p to 768.5p in sympathy.

Whitbread lost its head, falling 56p to 1,039p on worries of a bid war with Bass, down 14p to 937p, over the pubs owned by Allied Domecq, up 3.5p to 530p.

Marks & Spencer collapsed a further 12.25p to 379p. The market is almost certain that today's results will be awful and believes there might even be another profit warning. Other retailers suffered from M&S's gloomy prospects, with GUS shedding 26.5p to 670p and Storehouse, figures on Thursday, down 10.5p to 134.5p. Compass showed M&S how to do it; the catering group firmed 9p to 634p on expectations that today's figures will be good. There should be an update on the rumoured acquisitions of a Swiss vending giant.

Classic defensive plays featured prominently among the few blue-chip risers. The mining groups Billiton, up 4.5p to 181p and Rio Tinto, 19p higher to 960p, were boosted by their safe-haven status and reports that the IMF wants sterling lower.

Utilities Centrica, up 1p to 119p, and BG, 0.75p higher to 359.5p, were liked as dull-but-safe. United News & Media joined the exclusive risers' club thanks to a CSFB "buy" note; the stock rose 14.5p to 671.5p as the broker targeted 850p.

Tomkins provided the only glimmer of amusement. A rogue trade - put through on the much-reviled Sets by a careless trader - sent the shares shooting up 22 per cent to a 1999 high of 320p, when the price was around 270p. Normal service was resumed after a suspension and Tomkins ended 4.75p lower at 258p.

Talk of weaker sterling helped British Steel to a 3.5p rise to 143.5p. However, fears of higher UK rates knocked the housebuilders; Bellway crashed 24p to 372.5p, while Redrow lost 9p to 192.5p and Barratt fell 12.5p to 341.5p.

Returning counter-bid talk pushed the condom-maker London International 3.5p higher to 191.5p. Food producer Hillsdown put on 13.5p thanks to rumoured buying by bidder Hicks, Tate, Muse, Furst to ward off a counterbid by Candover. Fading hopes of a takeover dragged the metal-basher Morgan Crucible down 16p to 311.5p.

Safeway rose 3p to 257p amid a further share buyback vague bid talk. The airport group TBI held firm, losing just 0.25p to 95.75p as rumours that George Soros will take a stake circulated.

The electronic minnow Bulgin soared 19p to 96p after the pounds 1.3m sale of a subsidiary to rival Deltron, down 1.5p to 93.5p. The packaging group GEI nearly halved to 20p after the discovery of accounting irregularities.

Among football stocks, Manchester United rose 0.5p to 187p after winning the league title. Southampton Leisure scored a 6p advance to 44p as the Saints stayed in the Premiership, but Charlton Athletic plunged 4p to 38.5p after being relegated.

SEAQ VOLUME: 689.5m

SEAQ TRADES: 75,306

GILTS INDEX: 108.18 -0.06

THERE ARE whispers that Wyko is about to go private through a management buyout. Shares in the maker of parts for the power engineering industry rose by 7.5p to 121p yesterday amid rumours that the board could recommend an MBO in the next few weeks. A figure of 140p to 142p a share has been mooted. The company, with a market value of more than pounds 80m, is disappointed at its depressed share price and has been considering its options since February.

WELLINGTON Markets, one of Britain's leading operators of street markets, is to hit the acquisition trail.

The Ofex-traded company is expected to spend around pounds 750,000 in adding to its 40 markets around the UK. Wellington, founded by Royal Charter 755 years ago, is believed to be taking a close look at several markets in the South-east. The shares, listed on Ofex some three years ago, closed unchanged at 65.5p yesterday.