BAe and the Taiwan Aerospace Corporation have agreed to form a joint company. But it appears Taiwanese banks are not rushing to support the venture and TAC has not yet received the dollars 400m cash support it needs by Wednesday.
The Taiwanese deal is a significant part of the dramatic reshaping exercise John Cahill, the new chairman, has undertaken at BAe. Mr Cahill has said the link would stem losses and secure the position of the regional short-haul jets business.
BAe shares fell 11p to 388p, a two-day decline of 20p. They recently hit 429p. Rolls-Royce dropped 3p to 144p in sympathy.
The BAe weakness has tended to cloud the remarkable progress that led to the shares regaining their FT-SE 100 index place this month. At one time last year the price crashed to a 113p low.
The rest of the stock market drifted aimlessly in the sunshine. In thin trading the 100 index was lowered 7.2 points to 2,887.5. Kenneth Clarke's assertions about interest rates and taxes caused mild dismay but provoked little, if any, selling.
The market remains convinced that the interest rate trend is downwards and more overseas reductions are likely, eventually applying pressure for UK rates to be nudged lower.
There are also indications that the market is preparing for a busy time in the next few months. It is suggested that corporate activity is showing signs of increasing and more portfolio trades are contemplated.
Building and building material shares tended weaker. BPB Industries, the plasterboard group, was one casualty, falling 7p at one time but closing 4p down at 218p.
Year's results are due on Thursday. About pounds 55m against pounds 37.3m is expected.
Blue Circle Industries, following the unexpected management shake-up, dropped 7p to 252p and the construction group Higgs & Hill shaded 4p to 94p.
The shopfitter Campbell & Armstrong lost 4p to 17p after it warned it had suffered a pounds 3.5m loss in the year ended March.
SG Warburg, the securities group, dipped 12p to 727p. Cazenove and UBS Securities placed 15 million shares at 712p. The shares were sold to the two investment houses by Canadian National Railways pension fund at 705p. The sale cut the Canadian holding to 4.9 per cent.
There was a whiff of burnt fingers as Rothmans International and Dunhill Holdings returned following the tobacco and luxury goods split. The fine print dampened the excitement so evident when the shake-up was announced as the market closed on Tuesday. In busy trading Rothmans fell 28p to 692p and Dunhill 22p to 383p.
The warning that Eurotunnel may feel obliged to make a big rights issue, perhaps around pounds 1bn, next year sent the shares down 17p to 405p.
British Airways was helped 3p higher to 307p by a James Capel buy recommendation and Carr Kitcat & Aitken emerged as buyers of Boots, up 5.5p to 450p.
Capel reduced two chemical forecasts - Hickson International and Yorkshire Chemical. Hickson was cut from pounds 34.5m to pounds 29m and from pounds 39m to pounds 35m, while Yorkshire went from pounds 14.5m to pounds 13m and from pounds 16m to pounds 15m. The worsening outlook in Europe and indications the UK economy is not recovering as quickly as some hoped prompted the revisions.
Imperial Chemical Industries lost a further 4p to 659p as Sir Denys Henderson, chairman, duly delivered a downbeat statement to shareholders.
Tomkins, the conglomerate that caused a stir last year by snatching the Ranks Hovis McDougall food group from Hanson, was firm at 227p. Analyst visits to the RHM bakeries took place this week and the Tomkins bread touch left many impressed.
White bread consumption is showing signs of picking up after years of decline and Tomkins is expected to reap more cost-cutting benefits.
NatWest Securities and Capel are among the houses recommending the shares.
Greggs, the baker, was an indirect beneficiary of the Tomkins talk-in, gaining 20p to 695p.
Supermarket shares were weak, although Kwik Save managed to continue its recovery with a 4p gain to 743p. But Tesco, where there is talk of boardroom unease over the group's superstore strategy, fell 5p to 215p and J Sainsbury lost 11p to 488p.
Lucas Industries retreated 2p to 134.5p as Warburg made cautious noises following Thursday's analyst briefing and David S Smith, the packaging group, rose 16p to 359p following its takeover of Spicers, an office products wholesaler, and pounds 92.1m cash call.
Anagen, the medical instruments group, which had the rare distinction of being branded a new issue flop, remained below its 100p placing price with the shares edging ahead 3p to 94p. In first-time trading on Thursday they touched 107p before sinking to 91p.
The FT-SE 100 index lost 7.2 points to 2,887.5 and the FT-SE 250 index 2.6 to 3,213.1. Turnover was 509 million shares with 27,196 bargains. The account ends on Friday with settlement on 12 July. Government stocks eased.
Little Pan Andean, the Irish explorer seeking its fortune in Bolivia, has linked with Broken Hill Proprietary, the Australian resources giant. The alliance means that BHP takes on Pan Andean's obligatory work and spending commitments in what is regarded as the rich Chapare block in central Bolivia. Pan Andean shares, traded under rule 535, are 14p. They have climbed from 4p this year.
Alliance Resources, suspended at 9.5p in October last year, is on its way back to market. It is taking over Manx Petroleum, a 535 traded oil group, in a share exchange deal. The enlarged group will operate in the US and nurses ambitions to develop in the former Soviet Union. The revamping exercise includes a share placing and rights issue. Manx is run by John O'Brien, chief executive of Alliance.
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