Market Report: BAe leads the way to a hard landing

FOOTSIE PLUNGED as trading statements disappointed, profit forecasts were dragged down and the US central bank chief, Alan Greenspan, seemed to kill off hopes of a concerted G7 interest-rate fix. The blue-chip index finished 158.8 points down at 5,132.9. At one time if was off 190.2 points.

With New York in retreat and other world markets weak, there was no chance the stock market could buck the downturn. Home-grown problems also weighed heavily, with trading news responsible for many of the major falls. Nervousness ahead of today's "double witching", when options and futures expire, was another inhibiting influence. But it's an ill wind ... government stocks, on safe haven appeal, were strong and gained around a point.

Only 11 Footsie constituents produced gains. Insurer GRE, probably reflecting its gilts holding, rose 9.75p to 251.5p and Centrica, still reflecting figures and stockbroker buy comments, flared a modest 2.5p to 104.5p. EMI firmed 1p to 399p on relief that it is not pursuing a takeover of the PolyGram film unit. Earlier the shares had been up 14p. Others gaining included defensive shares such as United Utilities.

British Aerospace led the retreat. Fears that the Saudi Arabian government may postpone Al Yamamah payments sent the shares nose-diving 36p to 326p. It is estimated that BAe collects around pounds 2bn from its Saudi supply agreements each year.

The surprise Bass profits warning was another sobering influence. Bass slumped 59p to 666p, a two-day fall of 156p, and again dragged Scottish & Newcastle lower, off 15p at 710p. Whitbread, which had earlier resisted the Bass factor, lost 52p to 728p.

The rest of the beerage, once regarded as safe shares in times of stress, was weak with Greenalls down 27p to 332p and Vaux, calling time on its breweries to focus on hotels and pubs, 19p to 257p. Rank, the leisure group, was also caught in the Bass fall-out. It fell 22.75p to 248p.

The plug was pulled on the General Electric Company after the French group Alcatel warned that it would not hit profit expectations. The engineering and telecoms conglomerate added to the general unease and GEC, with similar interests, was spooked 39p to 424p. The Alcatel alert also caught the likes of GKN, off 40p at 620p.

Superstores gave ground as J Sainsbury prepared to embark on a price-cutting drive. There were reports that it plans special offers on a range of goods as well as spending heavily on a promotional campaign. BT Alex.Brown was one investment house to make cautious noises about the sector and Credit Lyonnais put a sell sign over Sainsbury; CSFB was another to relegate Sainsbury to its sell list. Teather & Greenwood reckons only Somerfield of the five leading supermarket shares is a buy; the rest should be sold.

The burst of analytical activity left Sainsbury off 37p at 525.5p; Asda 6.25p at 174.5p; Safeway 12.5p at 305.5p and Tesco 8p at 163p. Even Somerfield found the weight of gloom heavy and fell 10.5p to 457p.

HSBC and Standard Chartered gave ground after Warburg Dillon Read lowered its dividend growth estimates. HSBC tumbled 83p to 1,071p and Standard 38.5p to 400p.

Imperial Chemical Industries, still smarting from the Merrill Lynch downgrade, fell a further 23p to 500p and Ladbroke, fretting about a monopolies block on its Coral betting chain acquisition, lost 23.5p to 221.5p.

The prevailing retail gloom trapped Marks & Spencer, falling 30p to 445p, and Unilever was ruffled by a Gillette profits warning, down 40.5p to 490.5p.

Enterprise Oil, where Italian take over hopes linger, was at one time lowered by 40p; the shares closed off 15p at 375p.

Amid the carnage some brave souls were prepared to make optimistic forecasts. Panmure Gordon put a 950p target price on BT, which has just collected pounds 4bn from its MCI stake; the shares fell 29p to 815p.

Not only blue chips were engulfed in depression. The mid cap index crashed 71.4 points to 4,687.2 and the small cap 19.6 to 2,072.2.

Psion, the hand-held computer group, lost 31.5p to 471p with a line of 4 million shares hovering. Business Post, on its profit warning, was dropped a further 55p to 310p and results left Next off 37.5p at 407p.

Greenwich Resources softened 1.75p to 16p after it launched an agreed share exchange bid for MMS Petroleum. MMS rose 7p to 32.5p.

Meristem, a specialty chemical group, also headed north; up 5.5p after engineer Torday & Carlisle disclosed it held 16 per cent of its capital. T&C could not comment and Meristem said it had not been in contact with its new shareholder.

Tay Homes held at 121p after the Sunley family lifted its interest to 9.3 per cent. And Paramount, the pubs chain, stuck as 21.5p as the quaintly named Picks Pigs increased its holding to 7.64 per cent.

SEAQ VOLUME: 979.4 million



FIRTH, the steel group which is also involved in aircraft services, was one the few to keep aloft in the teeth of the storm. The shares gained 1.5p to 21.5p after it became known that the stockbroker, Beeson Gregory, planned investment meetings with institutions next week.

The group's shares have drifted down from 39.5p this year: they touched 68.5p two years ago. Firth's profits last time fell from pounds 1.7m to pounds 1m.

NEWCOMERS are still prepared to risk the misery of a falling market. MSW, with a management planning system originally developed for the Ministry of Defence, hopes to float in the next few weeks.

The company is planning to raise around pounds 3m, which will provide it with an pounds 8m capitalisation. Ahead of the share issue the group has won a contract to help the HSBC investment group to relocate from the City to Canary Wharf.

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