Footsie confounds expectations but could still hit 4,000 soon

The stock market has acquired many disconcerting habits over the years - a failure to live up to widely held expectations is one.

At the start of last week almost every marketman and his dog believed Footsie would soon enjoy a storming run to 4,000 points. They were wrong. Shares have dillied and dallied and the magical 4,000 remains unchallenged.

As Ian Willams at Panmure Gordon says: "It was inevitable that a week which started with near-unanimity that the FT-SE 100 index would break through the 4,000 barrier has ended in disappointment.

"When so many market participants agree on something, it is as good as guaranteed not to happen. The theory was that there was no economic data on the immediate horizon to upset the bond markets and that encouraging company results would continue to push the index further into new high ground. Both assumptions were flawed."

Nobody had expected an official, unofficial US source to gently remind the world that transatlantic interest rates would soon be going up, and company results, although at least matching expectations, failed to inspire the market.

Worries about higher US rates will hang around until they happen, probably after the presidential elections. In this country there may be further reductions, although with the economy continuing to strengthen the arguments for a hike are becoming less convincing.

This week starts with the market no longer besotted by thoughts of a dash to 4,000. Its almost a case of once bitten, twice shy. Yet, if the contrary theory holds, Footsie could well enjoy a surge to - even beyond - the 4,000 milestone in the next five sessions.

The undertone remains firm, strengthening the expectation the index should - in the near future - manage the 4,000 spectacular.

Then, according to the so often inaccurate herd forecast, things are likely to deteriorate. Most strategists see little progress beyond 4,000 at least until the election is out of the way.

Shares which are not in the exclusive Footsie club could take up the running. The midcap shares which make up the FT-SE 250 index have had a sluggish time since peaking in April.

There are , however, worries about the thinly traded tiddlers on the Alternative Investment Market. Institutional support, never fulsome, is now almost non-existent.

Any institution with a large slab of stock in an AIM company realises there is little chance of bailing out without devastating the price. So they are, in effect, locked in.

AIM - and the unregulated Ofex market - continue to attract recruits. Indeed, there would undoubtedly be a far stronger flow of AIM newcomers if many of the nominated advisers - every AIM company must have one - were not complaining of overwork and making new comers form an orderly queue. One entrepreneur with a business to float moaned last week he was unable to find a nominated adviser willing and able to start work on his share sale before February.

The AIM jam is renewing interest in the old fashioned reverse takeover of a shell company. A number of such deals are being prepared.

It's fairly quiet on the company results front this week. House of Fraser, the Army & Navy and Dickins & Jones department stores chain, is unlikely to add to any feel-good factor.

An increased interim loss of pounds 7m is expected, although there are hopes the dividend will be held at 1.7p.

The company, once part of the Fayed empire which still embraces Harrods, was floated at what was regarded as a cut price 180p in July 1994. The shares closed last week at 161.5p, pushed a little firmer by takeover speculation. There are hopes that Burton, which has made an outstanding success of the Debenhams department stores chain, could be interested.

Chairman Brian McGowan, one of the founders of the Williams Holdings conglomerate, found himself forced to make sweeping management changes in April in a desperate bid to put new life into the ailing stores group .

He appointed John Coleman, a former Texas Homecare managing director, as chief executive. He in turn has recruited fresh faces and instigated one of those strategic reviews without which a new management team feels undressed. The group has also sacked SBC Warburg, which undertook the flotation, as its financial adviser and stockbroker. Merrill Lynch is the new adviser and UBS assumed the stockbroking role.

This week's figures will reflect the failings of the former regime. It is possible Mr Coleman will be able to sprinkle a little cheer around with details of a new strategy. John Richards and Sean Eddie at NatWest Securities say: "With expectations so low and the absence to date of the customary honeymoon period enjoyed by the retail management there is scope for surprises."

The only heavyweight on the reporting list is Bank of Scotland. It is expected to produce interim figures of pounds 294m, up from pounds 262m.

Blenheim, the exhibitions group, may be hard pressed to confine its profit statement to figures; hopes of takeover action are likely to dominate the proceedings.

The company has twice in recent months confessed it has received bid approaches. The first set of talks, thought to be with United News & Media, came to nothing. Then came approach number two with Reed International and US interests thought to be in the frame. There is a good chance the bid will be announced with Wednesday's interim figures which, although overshadowed, will be striking, say pounds 25m against pounds 13.1m.

Some believe Blenheim is holding out for too much; there is talk it is demanding 550p a share. Highest they have been in the past 12 months is 468p.

HTV has yet to declare any bid approaches but with the expected upheavals in the media industry it is high on the market's hit list. Interim profits are likely to emerge at pounds 6.4m, up an unimpressive 5 per cent.