MARKET REPORT : Budget and futures fall-out cast shadow over Footsie

The fall-out from Friday's furious futures and options expiry continued to send shock waves through the stock market.

After brief opening strength Footsie sagged to a 46.9-point loss before an afternoon comeback cut the fall to 18.1 at 4,575.8. The rally reflected a late recovery in the futures market and takeover speculation. It was the sixth consecutive Footsie retreat, taking its loss to more than 200 points.

Stories about the damage inflicted by the witching hour are becoming sufficiently bizarre to enter City folklore.

Many are convinced a major securities house suffered a daunting loss - perhaps more than pounds 200m.

There is confusion whether it was the pounds 1.5bn punt taken out last November on the future direction of Footsie or the unwinding of a series of smaller contracts which created the volatility.

It is, however, clear that at least one substantial player took a hiding. The Footsie punt, backing a 4,300 level, had been out of the money for so long it would be surprising if evasive action had not been taken to cover at least most of the contract. It could be the rump of the contract, together with smaller deals, combined to do the damage as desperate attempts were made to square positions. It is widely believed stock was dumped in the cash market to meet derivative obligations.

Alongside the expiry excitement the market had to contend with the hovering shadow of Gordon Brown's Budget with the list of measures likely to be introduced growing by the day. The spectre of higher interest rates and an uninspiring New York display lengthened the shadows.

Outside Footsie there was a sad procession of falls. The FTSE 250 index was sharply lower and the FTSE SmallCap index fell 14.7 to 2,246. 4.

General Electric Co and National Westminster Bank provided the takeover excitement. NatWest finished with a 37p gain to 783.5p with rumoured bidder, Barclays, 5.5p firmer at 1,169p.

There is little doubt NatWest looks vulnerable after its abortive merger talks with Abbey National, the problems at its securities side and last week's profit warning.

The market is convinced corporate action will explode in the financial sector. NatWest has merely been added to the list of candidates.

Halifax and Alliance & Leicester, expected to celebrate their first day in Footsie, found the prevailing gloom overpowering and ended with losses of 20.5p to 749.5p and 8.5p to 594.5p respectively.

GEC, up 15.5p to 354p, responded to the resurrection of the British Aerospace merger story. It is thought boardroom changes at GEC could clear the way for dialogue to start. There is a growing belief that George Simpson, GEC's new power, is in favour of a BAe deal.

Centrica, the rather neglected side of the old British Gas, gained 2.5p to 71.25p following meetings with analysts.

Tobacco shares coughed and wheezed. The US litigation settlement dividend analysts. BAT Industries, which said its US off-shoot, Brown & Williamson, would take an initial $1.7bn hit if the settlement became law, lost 21.5p to 567.5p; recently floated Gallaher, Britain's biggest tobacco group, fell 18p to 282p and Imperial Tobacco 13.5p to 393.5p.

The surprise departure of Bill Cockburn from WH Smith left the shares wallowing 35p lower at 376.5p. The vacuum could revive stories Tesco is keen to strike at the high street newsagent. It is believed the superstores giant looked closely at Smith, believing many of its outlets could be converted to its Metro style of store.

Engineer Glynwed slipped 3.5p to 262p as NatWest Securities lowered its estimates but Imperial Chemical Industries was the main downgrading casualty, slumping 41p to 807.5p after Merrill Lynch was said to have slashed its forecasts by pounds 90m to pounds 450m and by pounds 80m to pounds 640m.

Maid, the on-line information group, fell 10.5p to 149.5p, responding to Reuters' decision to stop supplying its key news database.

Freepages, the telephony group, edged ahead 1.75p to 38.5p on talk it could be the subject of a reverse takeover and, on Ofex, Display IT, the information group, crashed 110p to 390p following critical comment.

Millwall, the football club rescued from the corporate cemetery, returned at 0.5p.

Young & Co's Brewery "A" shares frothed 35p higher to 697.5p. Guinness Peat, headed by New Zealand entrepreneur Sir Ron Brierley, has acquired a thirst for Young's and at last count had a 14.11 per cent interest in the family-controlled group's "A" shares.

Taking Stock

HTV, the independent TV contractor, edged ahead to 327.5p with stockbroker Henderson Crosthwaite suggesting United News & Media will bid at not less than 420p a share. Analysts Louise Barton and Mathew Horsman see profits little changed until HTV gets concessions on its licence payments from 1999. This year's figure could be pounds 11.1m.

Ennex International firmed to 23.5p. Incoming chairman Brian Cusack has purchased 200,000 shares. They came from the Hughes Family Trust, related to retiring director Pat Hughes, which sold 2.5 million. The company owns a zinc oxide deposit in Kazakstan.

Hemingway Properties has attracted stockbroker Albert E Sharp which regards the shares, at 38p, as a buy.