Market Report: BAe surrenders heights as uncertainty clouds view

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BRITISH AEROSPACE, best- performing blue chip of last year, seems to be running into gathering turbulence.

It is now accepted that its long- mooted joint venture with Taiwan Aerospace Corporation to produce business jets has collapsed and last week BAe announced another 800 redundancies.

A European replacement for Hercules, the ageing military transport aircraft, was another prop behind the shares' strength which propelled the price from 165p to 468p.

BAe would reap rich rewards from a Eurotransporter. But there are growing doubts about the deal being clinched. Indeed, BAe has felt obliged to respond to a growing US challenge by claiming that the UK could lose up to pounds 7bn if the Government decides to replace Hercules with a US Lockheed transporter.

With John Cahill, the chairman who has led the BAe revival, expected to leave shortly and fears the next set of results will be accompanied by more heavy write- downs, there is a gathering cloud of uncertainty over the group. The shares fell 10p to 414p.

The rest of the stock market had another busy session, but blue chips failed to hold their best levels. The FT-SE 100 index, at one time up 20.5 points, ended only 7.2 higher at 3,407.8.

Once again, the supporting FT- SE 250 index demonstrated the continuing demand for second- line issues, gaining 33.1 to 3,948.8, another peak.

The strength of the 250 constituents and the wide array of smaller players was underlined by turnover figures which disclosed that less than a third of the dealing action was attributable to the top 100 shares.

Shares had started the new account in fine form with New York's closing peak and hopes the Government will be forced into an early interest rate cut providing the incentive. But lacklustre futures ended the exuberance.

Insurance shares made a strong start, although gains were later trimmed by worries about the level of claims from the Los Angeles earthquake. Life insurances, however, held their best levels with NatWest Securities remaining positive.

Eurotunnel felt the impact of the early shots in the cross-Channel price war, falling 32p to 578p.

M&G, the investment group, spurted 50p to 1,088p in thin trading. One market-maker was caught short of stock. Other financials were firm, drawing strength from the high level of stock market trading.

LWT (Holdings), as talk of a white knight rescue continued, was firm at 668p. Bidder Granada was also little changed.

Among strong media shares Reuters advanced 18p to 1,920 and Emap put on 8p to 444p.

Tottenham Hotspur had a difficult session, falling 11p to 88p, the lowest since June. The market was ruffled by the latest comments about former chief executive Terry Venables, thought to be the next England manager.

Oils made progress with Shell up 8p at 726p. The crude price remains firm with some still expecting an Opec meeting to try to reduce production.

Interest rate-sensitive stock made headway with housebuilders turning in some of the better displays. Barratt Developments gained 14p to 252p and Banner Homes 12p to 159p.

Tesco fell 4p to 237p as UBS placed 4 million shares; SG Warburg crossed 3.7 million Iceland shares, up 3p at 197p.

Engineer Clayton Son, a Leeds business where a takeover marauder hovers, spurted 42p to 145p, a two-day gain of 75p.

Triton Europe advanced 13p to 33p as Triton Energy, already owning 59.47 per cent, mounted a mop-up bid. The offer, in convertible preferred shares, is said to put a value of 37.5p on each Triton Europe share.

Pittencrieff, at one time up 34p, ended 9p higher at 425p, as plans were put forward for separating its oil and gas operations from its communications side.

Hawtin, the clothing and sports equipment group, was unchanged at 22.5p as Longford Insurance Schemes sold a 4.4 per cent interest; London Financial & Investment rose 2.5p to 29.5p with WT Lamb Holdings lifting its stake to 8.01 per cent.

Last year the company received a mystery takeover offer at 32p a share. It was later withdrawn.

Soundtracs, makers of audio equipment for the music industry, gained 7p to 80p following a 76 per cent profits advance to pounds 615,587. The group is looking for acquisitions and some expect a deal to be clinched soon.

Andaman Resources, an Irish explorer, held at 19p as the expected revamp was announced. New directors are going in and an pounds 820,000 cash-raising exercise is under way. Like so many Irish resource groups it is attracted to the former Soviet Union and is examining gold and anthracite developments.

Waverley Mining jumped 5.5p to 50p, partly on its Scottish coal mining venture.

The account started confidently with the FT-SE 100 index up 7.2 at 3,407.8 and the FT-SE 250 index 33.1 at 3,948.8. Turnover was 808.3 million shares from 38,498 deals. The account ends on 28 January with settlement on 7 February. Gilts were firm.

Eastern Electricity is the first of the privatised utilities to use some of its cash hoard to buy its own shares. It acquired 1.2 million yesterday at between 641p and 644p. Eastern has shareholders' permission to buy up to 13.5 million shares. Further buy-ins are promised, as they make 'good use' of resources 'at the present time'. The shares closed at 644p.

Burn Stewart, a Scotch whisky group, has been short of friends for much of its market life. Floated at 140p in November 1991, the shares have been down to 100p. They rose 6p to 125p yesterday as NatWest Securities said they were attractive because of Burn's strength at the lower end of the market. The 5.3 per cent yield and the expected bounce make the shares a buy, it said.