Feel-good factor sees clothes retailers back in vogue

MARKET REPORT

The feel-good factor has found a new friend - in the rag trade. Shares in clothes retailers rose strongly yesterday as investors latched on to the idea that booming sales of "hard" durables like microwaves and CD players had spilled over into "soft" goods such as three-piece suits and twin-sets. An upbeat report by retail consultants Verdict predicting the high street boom will continue at least until 1998 also helped sentiment.

Next was the biggest beneficiary, shooting to the top of the Footsie performers table with a 13p gain to 570.5p. Morgan Stanley has just resumed coverage of the stock and likes Next's record and outlook. Recent interim results were better than expected with pre-tax profits up 27 per cent thanks to strong sales at the retail and direct mail businesses coupled with firm cost control. However, the broker would look to buy at lower levels.

Other analysts played down talk that Next might become a takeover target for cash-rich mail order group GUS, where Next chairman Lord Wolfson of Sunningdale recently took charge. However, his Lordship's appointment continues to fuel speculation that GUS and Next might sign some collaborative agreement, possibly pooling their credit reference systems into a shared database. GUS slipped 6p to 626.5p

Elsewhere in the sector, Moss Bros gained 55p to 1250p on news of better than expected interim figures and an impressive 11 per cent increase in like-for-like sales in the first eight weeks of the second half. Harvey Nichols put on 10p to 372p, Austin Reed, reporting tomorrow, added 3p to 209.5p while Etam, posting interims on Thursday, firmed 9.5p to 155.5p.

The Footsie notched up another record closing high, ending 6.7p better at 4031.5. However, the index retreated from an all-time high of 4046.6 hit in early trade as Wall Street struggled in vain to maintain the 6,000 level and profit-takers moved into international bond markets.

Taxi maker Manganese Bronze, always a good barometer of the City's overall fortunes, confirmed the still buoyant mood by reporting better-than-expected full-year profits of pounds 6.2m. The shares motored ahead 12p to 360.5p.

Shell broke through the pounds 10 barrier for the first time, rising 17p to 1016p as the company confirmed it was in talks with Texaco about pooling their downstream operations in the US. Earlier reports suggested the two would link up with Star Enterprises to merge their US refining and marketing assets worth $10bn.

BP rose 12p to 699.5p in sympathy, but joy in oils was not unconfined. Burmah Castrol eased 25.5p at 1141.5p as the shares went ex-dividend and Kleinwort Benson changed its recommendation from buy to hold.

British Airways was again in demand, climbing another 6.5p to 601p, after touching 615p, as BZW advised clients to buy. The recommendation came hard on the heels of speculation that the European Commission is likely to give the green light to legislation allowing the buying and selling of airport slots.

British Gas was the most actively traded issue as 13.3 million shares changed hands. It was also the weakest Footsie stock, closing down 6.5p at 181p on further consideration of its decision to reject the industry regulator's price controls for TransCo, its pipeline arm, and request a Monopolies and Mergers Commission inquiry instead.

Railtrack dipped 6p to 284p as nervous dealers anticipated an adverse report this week on the Watford rail crash.

EMI, where finance director Simon Duffy sold shares last week, again sounded a false note with investors as Cazenove cut its profits estimates for the record company to pounds 405m from pounds 422m for 1996, and to pounds 450m from pounds 480m for next year. The shares weakened 12.5p to 1266.5p.

Old bid favourite Blenheim headed the FTSE 250 league table with a 22p gain to 435.5p. The exhibitions company is reported to be close to agreeing a pounds 450m takeover worth about pounds 480p a share from Anglo-Dutch publisher Reed, down 4.5p to 1183p.

Restaurant chains and pub companies remained flavour of the month. Oriental Restaurants, which came to the market last week at 154p, continued to whet investors' appetites, rising 13p to 210p. JD Wetherspoon reached a record high of 1130, up 17.5p, as did PizzaExpress, up 4p to 491.5p.

Business services group Blick was the day's biggest loser, diving 103p to 425p on a profits warning. Also unloved were shares in specialist textiles group Marling Industries, down 3.25p to 14.5p.

TAKING STOCK

Paper maker David S Smith fell 10.5p to 324p after chief executive Peter Williams sold 300,000 shares for what are described as "personal reasons". They were bought at the equivalent of 147.5p as part of a rights issue five years ago. Mr Williams has earned a reputation for being one of the sector's most astute deal-makers, having lead a pounds 608m management buy-out of Reedpack from Reed International in 1988 only to sell the company to Sweden's SCA two years later for pounds 1.04bn, making pounds 5m for himself in the process.

Chiroscience jumped 11.5p to 407.5p. The biotech group doubled first- half sales and is accelerating phase three testing for its Levobupivacaine local anaesthetic. No less then five drugs are now undergoing tests and new alliances could be on the cards.