Market report: American jobs boost sends a shudder through London

Once again the American employment figures managed to send shares crashing. As soon as it became known that the number of people on the non-farm payroll had risen by 348,000 - double the expected increase - the stock market collapsed without even waiting for New York's reaction.

Quickly a 10-point fall by the FT-SE 100 index was stretched to more than 50. At its worst Footsie was down 65.5; it closed at 3,706.8, off 53.5. Government stocks fell by up to pounds 1.

The US jobs data is beginning to haunt the market. It is achieving a nasty habit for surprises. A few months ago the jobless numbers sent shares here and in New York tumbling as hopes of further interest rate cuts evaporated. Now the worry is that trans-Atlantic rates could be forced higher.

The savage mark-down illustrated the fragility of the market, with political uncertainties increasingly eroding sentiment.

Worries about domestic interest rates were also rife. Thursday's modest cut could quickly become an embarrassment if the growing strength of the US economy forces an increase next month.

Only four blue-chips escaped the meltdown. British Aerospace was the one higher-flyer, climbing 24p to 937p, a new high.

Merrill Lynch helped by putting a 1,400p target price on the shares. SBC Warburg was another making positive noises. Talk also swirled that BAe had linked with Boeing, the US group, to compete for a pounds 2bn Ministry of Defence contract. Just to add to the excitement, which lifted the shares briefly to 944p, the market latched on to a story that Airbus Industrie, where BAe has 20 per cent, was near to floating in London and Paris.

The others to survive the rout were Thames Water, up 7p at 578p, RTZ (3.5p to 971p) and Thorn EMI (5p to 1,833p).

Thames, the biggest of the privatised water companies, flowed on hopes of a bid - probably from the US. Turnover was heavy. RTZ clawed back a few coppers after Thursday's sharp fall following the collapse of the copper price and Thorn reflected hopes of positive music when its last figures as a combined rental and showbiz group are played next week.

Profits are expected to score a pounds 100m-plus gain to around pounds 525m but it is the planned split, breaking the group into stand-alone rental and showbiz operations, which is creating the main interest.

Some of the perceived take-over targets, particularly those with extensive US interests, were the worst casualties. Royal Bank of Scotland fell 23p to 509p; Commercial Union 20.5p to 578.5p and Pearson 23.5p to 668.5p.

BTR was in deep despair even before US influences appeared. Conglomerates are out of favour and BTR more than most. The shares were at one time down 10p in heavy trading. They finished off 6.5p at 269p, a new 12-month closing low. The 95/96 warrants fell 3p to 17p; they offer the right to buy shares at 258p.

Last month BTR, which has disappointed in recent years, added to the gloom when it said first-half profits would "be moderately" down.

Two Premiership football clubs, somewhat perversely, made a muted response to the television deal. Manchester Utd fell 24p to 439p and Tottenham Hotspur 7p to 454p. BSkyB's success was greeted with a 5.5p fall to 430.5p.

Lucas Industries reversed 15p to 239p as BBA revealed it had abandoned plans to barge into the cosy Lucas merger with Varity, the US car parts group, in a pounds 3.2bn deal. BBA, at one time up 15.5p, ended unchanged at 303p.

Lucas, in effect, motored against the trend, reducing an earlier 23.5p fall. BBA's intervention had always looked unlikely but the market is still convinced there is a strong chance of Continental, perhaps even American, takeover interest.

Cairn Energy is attracting bid speculation, gaining 9p to 274p. Talk is that Mobil, the US giant, could be interested. The market is excited by Cairn's developments off Bangladesh where, by all accounts, it has a rich strike.

GGT, the advertising group, put on another 6p to 244p on bid speculation and Blenheim, the exhibitions group where a bidder has been flushed out, added a further 7p to 458p. The shares started the week at 311p.

Liberty, the retailer, rose 42p to 395p on the latest reorganisation and MAID, in late trading, gained 38p to 336p on a buy recommendation from Merrill and talk that Reuters, the information group, planned to bid for the on-line information provider.

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