Market pauses for thought on a quiet trading day

MARKET REPORT

It was time yesterday to take stock of events, or rather the lack of them, that last week powered the leading share index to within a whisker of its all-time high.

The mood in dealing rooms was somewhat deflated after the giant bidthat had been expected on Friday failed to materialise. Thoughts soon turned to the plethora of UK economic statistics to be unleashed this week, starting today with the public sector borrowing requirement for September, followed by average earnings, unemployment, and retail sales tomorrow.

Share prices drifted in negative territory throughout yesterday. The FT-SE 100 share index closed 10.7 points down, and the FT-SE 250 lost 6.3 to finish at 3,939.0. The gilt-edged market was also subdued, ahead of today's announcement of the timing for the next Treasury auction. Trading volumes in equities were dismal, and transactions were generally small- scale. The rumour mill, which had been in overdrive last week, was barely turning over. But the belief that a big takeover is in the wings still held some sway, helping to underpin some of the leading shares.

Gains among the leaders were contained to just a few pence. Thorn EMI was the only member of the top 100 club to record a double-digit advance, rising 21p to pounds 15.27 on some hopes that its plans to demerge will be superseded by a full-blown bid by Viacom or Disney. Cable & Wireless came close to double-digit territory, with a 9p advance to 426p on a rumour that the company was about to form a strategic alliance with Siemens of Germany.

The rumour, for once, may hold some truth, with an after-hours announcement from Siemens that it tomorrow will announce an acquisition and strategic partnership with a leading UK telecommunications carrier. Analysts believe Siemens may well buy the customer equipment business, formerly known as Telephone Rentals, and part of C&W's Mercury Communications subsidiary.

Grand Met, which featured in several different rumours last week, remained in demand. More than 3.5 million were traded, and the price rose 3p to 457p , just 2p shy of the year's high.

The speculation that GrandMet may sell its IDV drinks business to Allied Domecq, down 7p to 518p, was still doing the rounds. The main reason for Allied's dismal showing yesterday, however, probably had more to do with the disappointing results and a gloomy statement on prospects for the UK market in spirits from Highland Distilleries, off 12p to 379p.

There are some fears that Christmas could see a repeat of the price -utting battle between Allied, producer of Teacher's whisky, Guinness, maker of the market-leading Bell's, and Highland, which derives a large part of its profits in the UK from its Famous Grouse brand. While Guinness, 3p firmer at 518p, hinted a couple of weeks ago that it was unlikely to start an all-out price war, it is almost certain to duplicate last winter's multi-buy offers.

Fears of a fresh outbreak of hostilities were spurred by Asda's slashing of prices on a range of non-prescription drugs. Lloyds Chemists, weak of late, suffered most from the backwash and fell 17p to 228p. None of the other leading drugs retailers said they would immediately follow suit - but on past record it would be churlish to rule out another round of price cuts.

Unichem, both a wholesaler and retailer of pharmaceuticals, lost 9p to 264p, and Boots shed 15.5p to 568p. Kingfisher, owner of Superdrug, dipped 8p to 502p, hardly the best endorsement the company might have expected on a day it announced that Sir John Banham, former director general of the CBI, would succeed Sir Nigel Mobbs as chairman.

BCE, the computer games company quoted on the Unlisted Securities Market, gained 1.5p to 21p amid further talk of stake-building. Almost 1.5 million were traded.

Encouraging prospects for the Tau field in the North Sea lifted Enterprise Oil by 7p to 356p. Edinburgh Oil & Gas added 2p to 20.5p after taking stakes in Storrington and Albury, two onshore fields in the UK.

Close Brothers, the small merchant bank, finished 9p better at 318p on a 96 per cent take-up of its rights issue. NatWest Securities easily placed the rights rump of 730,000 shares at 307p each.

Among the fallers were Airtours - off 6p to 359p on the back of a bearish circular from NatWest - and BPB Industries, down 6p to 277p after BZW downgraded its recommendation from hold to sell.

TAKING STOCK

o Gus Carter, the Sunderland-based betting shop chain, slumped to yet another low, dropping 9p to 52p on a further warning about the effect of the Lottery on its business. The shares were floated five months ago at 80p. After a recent drop in pre-tax profits from pounds 589,000 to pounds 377,000 for the six months to June, the company yesterday warned that trading has continued to be disappointing. The number of bets and the average size of stake fell throughout the summer, and win margins have also been poor.

o While betting shops are suffering, casino operators are faring better. London Clubs, down as low as 264p in the last year, closed 3p up at 426p on news of a management contract to run the Beirut casino. The company will also take an unspecified minority holding in the casino complex, owned by Casino du Liban.

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