BT reaches 12-month high despite windfall tax threat

MARKET REPORT

Telecoms dominated the stock market. Nearly every broker in sight seemed determined to dial into BT, and rival Cable and Wireless was engulfed by speculation it planned a major US acquisition.

BT was the heaviest traded share and best performing blue chip, hitting a 12 month high with a 19.5p gain to 461.5p. The market has been impressed by a string of investment presentations, mainly relating to the proposed $20bn takeover of MCI, the US communications group.

The BT share advance has been scored despite Labour threats of a windfall tax and the giant's seemingly endless battles with its industry regulator.

At 461.5p the shares are still below the 486p peak, hit at Christmas four years ago.

The MCI deal, which still has regulatory hurdles to overcome, is part of BT's push for a world-wide role. There is talk that it is planning an alliance with Telefonica, the Spanish group, and yesterday it announce a Japanese joint venture and its involvement in a bid for a Singapore licence.

Cable, up 3p at 509p, is said to have its sights on Sprint, the US group. It was reported to be negotiating with two Sprint shareholders, France Telecom and Deutsche Telecom.

The French denied any talks with Cable, and Sprint claimed a deal with the UK group was not possible under standstill agreements it had with its Continental shareholders. Cable would probably require a rights issue to fund the deal.

It is still negotiating with the Chinese over its control of Hongkong Telecom. The group is expected to cut its HKT stake to nearer 35 per cent in exchange for a prominent role in the development of China's telephone industry.

The rest of the market remained subdued by the election. Footsie ended 24.6 points lower, unable to draw any support from a New York undermined by interest rate worries.

The planned windfall tax continued to weigh on privatised groups with the generators suffering the added discomfort of Westminster calls to give up more generating capacity.

Beer and leisure shares felt the pressure of Labour's proposals for a minimum wage while Bass, off 19.5p to 820.5p, also had to contend with the possibility that the Whitehall probe into its Carlsberg Tetley takeover will be delayed until after the election. First Leisure fell 16.5p to 345.5p.

Associated British Foods, the bread and sugar group, surrendered 5p to 511.5p on persistent talk that it intends to sell part or all of its Irish retailing operations to Tesco, little changed at 334p.

The food producer owns Ireland's largest supermarket operation and also has clothing shops in Eire.

Carpetright had a threadbare session, at one time down 31.5p on worries of a profits warning. But a denial from finance director Ian Sneyd trimmed the fall to 16.5p at 562.5p. Meeting institutions at Kleinwort Benson, he said the market's pounds 33m to pounds 35.5m range was "acceptable" but added analysts at the top should be "more concerned" than those at the bottom.

The twitchiness over Carpetright followed the Limelight fiasco - down another 10p to 97.5p - and the MFI warning.

Cairn Energy's figures and link with Shell provided a 56p boost to 634.5p; Enterprise Oil was back in the frontline with a 16.5p jump to 663p.

Kingfisher bounded 22.5p to 697p on its results but a downbeat Vickers performance left the shares 22p lower at 239p.

Financials had a subdued session. Mercury Asset Management, where suggestions of a Salomon Brothers strike linger, lost 31p to 1,334p and Perpetual was lowered 30p to 2,705p.

Abbey National dropped 17p to 732.5p as Kleinwort and Teather & Greenwood made negative noises.

Stanford Rook, developing a tuberculosis treatment, was the drug casualty. The World Heath Organisation's TB breakthrough sent the shares crashing 120p but at the close they were down 40p at 515p. Xenova, on its trading link with Zeneca, jumped 80p to 435p; the shares came to market at 215p in December.

Stagecoach was again shunted lower, retreating another 34.5p to 689p on its trains embarrassment.

Parity, the computer group, shaded 6.5p to 533.5p as HSBC's investment bank sold one million shares. It found a rich profit irresistible. As Samuel Montagu it backed a management buy-in led by Philip Swinstead four years ago. The price? Just 60p. The bank sold at 527p a share and still has a 2.3 per cent interest.

Kenwood, the kitchen appliance group, rose 11p to 148.5p as bid speculation resurfaced.

Taking Stock

Hay & Robertson, the merchandising group, fell a further 3.5p to 124p. Last month the shares were 178.5p. The slump is surprising close followers of the company, which has trading links with Rudd Gullit, Terry Venables and the Football Association.

There are suggestions interim profits will match the last full-year's pounds 613,000 and the company's stockbroker, Wise Speke, is thought to be near to producing a buy circular

Cementone, the paint and wood preserving group, put on 4p to 52p, best for 12 months. The interest was created by talk of corporate action. Entrepreneur Andrew Perloff is deeply involved but the biggest shareholder is Indian tycoon Vijay Mallya; he is thought to be a likely seller of his 34 per cent stake.