Bounding pound puts overseas earners under pressure

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The Independent Online
The Chancellor killed what had appeared to be a determined rally. His surprise, if minimalist, base rate increase left the stock market looking distinctly unhappy with Footsie cut another 29.6 points to 3,963.9.

Many had suggested a hardening of interest rates would be welcomed, helping to steady jitters over the economy overheating. They may be right in the longer term. But shocks, even if only mildly unpleasant, will not receive a rapturous response. Over the session Footsie experienced a 50-point swing in often brisk trading.

With sterling making predictable headway on the back of the rate increase big overseas earners were among the worst casualties with Tomkins suffering the sharpest blue-chip retreat, down 3 per cent to 257p.

Vodafone was almost, but not quite, engulfed in the interest rate gloom. In early trading the shares were up 11.5p to 245p as some picked up talk of a bid from AT&T, the US giant. But a more intriguing story could be detected. Perhaps chairman Sir Ernest Harrison was thinking in terms of a demerger, creating a stand-alone operation to take in the UK business and another to encompass the overseas activities?

Sir Ernest is no stranger to the demerger art. He has already successfully hived off Vodafone and Chubb Security from Racal Electronics. With the diverging performances of the two Vodafone operations there is, it is thought, a case for another Harrison split. The shares, firm lately on analysts support, ended 2.5p higher at 236p.

BAT Industries, which said it was keeping under review a possible demerger of its tobacco side, fell 9p to 427p after figures. J Sainsbury, the superstore chain, managed an 8.5p lift to 363.5p as poor results were offset by a confident trading statement.

Another rumour put Abbey National and Prudential Corporation around the same boardroom table. Talk the two planned a mega-merger lifted Abbey 1.5p to 638.5p but trimmed the insurance giant 1.5p to 465p.

Utilities again attracted interest on bid hopes. On the electric pitch London, Southern and Yorkshire made headway but East Midlands continued to try the patience of its supporters, shading 2p to 540.5p. Among waters Wessex rose 11p to 349.5p. There was again hints of action among communications shares, with the industry free-for-all starting tomorrow. Unquoted Westcountry, the television operator for the South-west, could be the first to fall with United News & Media and HTV among the front bidders. Yorkshire Tyne Tees, up 20p to 1,242.5p, could also figure in the early deals. The company is due to move onto the Crest share settlement system on Monday week and for technical reasons any bidder, almost certainly Granada, could avoid a lot of hassle by moving before the change.

Alpha Airports climbed another 4.5p to 107p on bid speculation and Fairey, the engineer, put on 14.5p to 687p on talk of corporate action.

Cookson, the industrial materials group, fell 7p to 237p as long-time bear NatWest Securities again made cautious noises. It has cut this year's profit forecasts by pounds 20m to pounds 170m and next by pounds 10m to pounds 200m.

Profit warnings took their toll. Wellman, the engineer, slumped 13.5p to 35.5p and Havelock Europa, fitters of interiors, 84.5p to 283p.

Uncertainty about the future direction of Lonrho after Dieter Bock's deal with Anglo- American of South Africa, lowered the shares 13p to 150.5p. Verity, the sound group, continued its relentless progress, gaining 3p to a 41.5p peak. The shares were 10p in July. The company's revolutionary wafer-thin sound system has generated the interest. Presentations are taking place in Japan and hopes are running high they will lead to a deal with a Japanese group.

Parity, reflecting a deal with BT and confident trading noises, gained 16p to 318.5p.

Two contrasting companies make their debuts on AIM today. Mondas, Tim Simon's latest computer operation, could achieve a 10p premium over its 75p placing price. Jardinerie Interiors, engaged in the rental and sale of interior plants, is expected to enjoy a comfortable advance, possibly 20p, from its 114p placing.

Headed by William Braid the company was a buyout last year from a garden centres business. It has already put through two takeovers and the pounds 4m raised by the placing will fund two more plant company deals.

Other acquisitions in what is still a fragmented industry are likely.