Market Report: BA climbs as investors see blue sky ahead

THE CLOUDS are lifting from British Airways. Hit earlier this month when a leading US analyst slashed his profit forecasts, the shares climbed to a new high as some investors took the view that the outlook was becoming more encouraging.

American influences helped the upsurge. Two transatlantic airlines fuelled hopes that the aviation industry was recovering by producing better than expected results. And what could be BA's first franchise move, a link with the small City Flyer Express, also attracted attention.

It was all a far cry from the attitude when Glenn Engel, a US analyst, cut his profit forecast for the year to next March to pounds 175m and suggested the 'world's favourite airline' could expect to produce no more than pounds 265m in the following year. His pounds 175m forecast compared with up to pounds 400m by UK analysts.

Despite the strength of the shares, up 8p at 320p, some still fret about BA's policy of taking minority stakes in overseas airlines. Industry unrest still simmers and there are even doubts expressed about bonus ticket offers. These, it is argued, should be regarded a significant liability until realised. BA's confrontation with the small Virgin airline, clearly a protracted affair, could also be an inhibiting influence.

BAA, the airports group, was another to score from the US results. It rose 14p to 736p.

Ahead of the Maastricht vote, the stock market dillied and dallied. Early gains were eliminated but a little US buying and a late surge by the hard-pressed drug blue chips pushed the FT-SE 100 index up six points to 2,820.1 by the close. Renewed tensions in the European exchange rate mechanism restricted activity.

The ruling by a US court upholding Wellcome's Retrovir patent produced the sudden display of exuberance. Wellcome shares surged 29p to 641p, towing Glaxo Holdings 13p higher to 534p. Zeneca rose 4p to 599p and even Medeva managed to attract support, up 6p to 108p, once again in busy trading.

Tiphook, the container group, had an active session following overnight New York speculation of a takeover bid. The shares closed 47p higher at 244p, although the company denied the takeover talk.

A 'telephone conference' with US investors was held last night. On Wednesday Tiphook disclosed that, through Bank of New York ADRs, its US shareholding had reached 38.12 per cent.

Ratners, the struggling jeweller, slipped 0.75p to 29.75p. A US pension fund has sold 18.63 million shares, more than 6 per cent.

VSEL Consortium, the ship builder, again attracted attention, up 18p at 908p. Talk of a new military contract and an apparently successful investment presentation helped the shares.

Banks remained subdued. TSB, unchanged at 196p, continued to encounter disposal rumours. The latest concerned its Swan National car hire and leasing group. It was suggested that all, or part, of the operation would be acquired by Forward Trust, part of HSBC, next week.

The Swan story mingled with almost continuous speculation that TSB had lined up a buyer for its Hill Samuel merchant banking offshoot. But one TSB disposal came unstuck. A deal that would eventually have led to the sale of its estate agency chain was abandoned.

British Steel was strong. In busy trading the shares advanced 5.5p to 107p, highest for more than a year. Positive noises from James Capel helped; so did a growing expectation that BS could come out of any steel industry shake-up in better shape than most.

The brick maker Ibstock Johnsen held at 65p. Barclays de Zoete Wedd has sharply reduced its expectations for this year. It now expects a break-even position against earlier hopes of a pounds 3m profit. Next year's estimate has been cut from pounds 10m to pounds 8m.

Eurotunnel was unchanged at 405p, after touching 413p. There was a flurry of activity in the 1993 warrants, with Seaq putting turnover at 5.5 million. The price was unchanged at 17p.

Gold shares were weak, reflecting the bullion price. Monarch Resources dipped 9p to 164p. Waverley Mining Finance also suffered, down 4p at 28.5p.

Brent International, the chemical group, held at 100p. The stockbroker Shaw & Co believes the shares are a recovery buy. Profits this year are expected to sink to pounds 8.25m but 1992's level of pounds 11.5m is forecast for next year.

Eve, with interests ranging from transmission to barrier hire, continued to respond to its results, gaining another 38p to 438p. The stockbroker Beeson Gregory expects pounds 4.15m this year and pounds 5m next.

Sage, the software group, recovered some of the ground lost following Wednesday's profits warning, gaining 29p to 414p.

Brown & Jackson, the Poundstretcher retailer, held at 14.5p. Its rights issue achieved a 93.7 per cent take-up. Hartstone rose 4p to 49p in response to the increased stake by Fidelity, the US investment group.

Little Eidos, a video business, rose 5p to 53p. The shares have risen from 33p since it announced a marketing deal last week.

The FT-SE 100 index ended six points higher at 2,820.1 and the FT-SE 250 index 5.1 at 3,200.5. Turnover was 581.8 million with 24,427 bargains. The account ends next Friday with settlement on 9 August. Government stocks were mixed.

British Syphon gushed 55p to 180p. It is raiding its cash pile to pay a special dividend of 62.35p a share. The dividend costs pounds 22m, leaving pounds 11m. Syphon planned to use the cash for acquisitions but has not found anything suitable. In 1988 a management buyout was blocked by Nathu Ram Puri, whose interests hold 25.24 per cent. Management has 69.39 per cent through a company called Britannia.

There is talk that Paramount, the Chester-based pubs chain that has grown rapidly by buying pubs from brewers, is on the verge of clinching another deal. It already has brewery shareholders, including Bass and Burtonwood Brewery. Run by Bob Price, it is due to announce figures soon. The shares have performed poorly. Once over 20p, they firmed to 9p as the pub story gathered strength.

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