Market Report: Bass falls flat as City worries over hotels division

BASS LOST its head yesterday as vague rumours of a profit warning did the round just before the last orders' bell.

Most dealers acted against the instincts and shunned the beer and hotels group as late afternoon whispers of bad trading sent the stock 32p lower to 890p - one of the day's worst blue chips.

These teetotaller trades were inspired by speculation that Bass' hotels division, which includes the Intercontinental chain, might be having a difficult summer.

According to the market's wisdom, London hotels are suffering as penny- pinching tourists are kept away by the strong pound. And as for the international operations, increased competition from the likes of Hilton could be eating into Intercontinental margins.

Some super bears said that Bass' beer operations might be also having a tough time even though the warm weather should encourage more and more punters to down their pints.

The Bass whispers triggered a sell-off in the rest of the sector amid dealers' fears that other beer and leisure groups might be drinking in the last chance saloon.

Hotel owner Granada booked a 17.5p drop to 618p, while brewer Whitbread poured 24p lower to 876p. Rival Scottish & Newcastle, going ex-dividend on Monday, plunged 15.5p to 649.5p in fairly good volume, as the sellers moved in.

The bearish feeling across the board sparked suggestions that a big broker was preparing to a hefty downgrade of the whole sector.

The rest of the market toasted a winning performance against all the odds. The FTSE 100 finished 19.4 better at 6,121 despite renewed fears of a US rate hike. Strong employment numbers in the States caused an opening loss in the Dow as Yankee dealers said that a rate increase by the Fed is now almost inevitable. Wall Street sentiment was further dented by growing speculation that a leading US financial house, or a hedge fund, had taken a large hit in the swaps market. However, London held its own and domestic market watchers noted that, after having underperformed New York on Thursday, it was time for a respite.

The undercard had a mixed day, with the FTSE 250 closing 4.9 down at 5971.1 and the SmallCap rising 5.2 to 2727.7.

Bids, real and rumoured kept blue chips on their toes. Cadbury Schweppes sparkled 20.5p higher to 407p - the day's best big hitter - on rumours of acquisitions of a US confectionery group. Thursday's post-close announcement that it is talks to buy the Dr Pepper Texas bottler was also a factor. The $750m deal would give Cadbury direct control of one of its main bottler. Some dealers were whispering that the Texan bottler's boss, the US drinks guru Jim Turner, could join the UK group after the acquisition, boosting its expertise in the States bottling market.

A bit of late buying ahead of Monday's ex-dividend date also contributed to Cadbury's sweet rally.

The business services group Hays surged 20.5p to 662.5p on revived talk of a bid from Rentokil Initial, down 3.75p to 225.25p. Other rumours suggested the acquisitive Rentokil could go for a cash-raising exercise before a strike.

Cable & Wireless rang up a 32p jump to 765p after it finally sold One2One to Deutsche Telekom for pounds 8.4bn.

The building materials group Hanson cemented a 19.5p rise to 529p as ABN Amro said "buy" and amid whispers of further bolt-on acquisitions.

Barclays cashed in a 66p rise to 1834p as a host of brokers upgraded after Thursday's positive interims. Directors' share buying and vague bid talk pushed Abbey National 23p better to 1,009p. Hopes of US disposals lifted ICI 16p higher to 751p.

No such luck for Telewest. The cable group fell 18p to 235.25p after broker DKB downgraded following recent poor interims. Unilever was also undone by disappointing results and shed 24p to 591.5p, while fears over forthcoming numbers grounded British Airways, down 9.25p to 388p.

Retailers generated plenty of bid rumours in the midcap. Supermarket Somerfield bagged a 3.5p rise to 223p in high turnover amid vague talk of a merger with Safeway, down 2.5p to 230.5p. Both chains are still mooted as targets for Kingfisher, up 2.5p to 695p.

Storehouse, the owner of Bhs and Mothercare, firmed 2.5p to 119.5p after some late heavy buying on rehashed rumours of a takeover from Debenhams, up 16.5p to 355.5p after a Cazenove push, or Philip Green. Clothes retailer Austin Reed rose 7p to 95p on vague bid whispers.

Filtronic, the maker of mobile phone parts, dialled a 39p rise to 770p on rumours of major deals, while boiler group Hepworth rose 10p to 212.5p as dealers warmed to recent results and talked of imminent acquisitions.

Enterprise Oil flared 14p higher to 458p after a deal with minnow Paladin Resources, flat at 24p, to explore a North Sea field. Small explorer Dana Petroleum jumped 0.5p to 8.5p on rumours of a huge gas find in Holland.

Newcomer eXchange, the online financial information group, rose 9p to 209p rise as nearly a third of its 203m shares changed hands. The debut was marred by a huge row between broker Warburg Dillon Read and an army of private investors who claimed they had not been notified of their share allocation on time. AIM new arrival netvest.com - an investor in small web companies - more than doubled, rising 25.5p to 50.5p.

Cash shell Tarpan soared 3.5p to 133.5p on talk of an Internet buy, while Israeli software group Pilat Technologies beamed 5.5p higher to 62.5p on talk of acquisitions or even a bid.

SEAQ VOLUME: 1.03bn

SEAQ TRADES: 73,394

GILTS INDEX: N/A

THE SMALL drug company Bioglan Pharma shot 10p higher to a record 409.5p amid talk that it might soon enter the FTSE 250. Since floating early this year, shares in Bioglan, which specialises in marketing and distributing skin treatments, had a storming run, rising nearly 58 per cent. This soaraway rise has boosted Bioglan's market value to over pounds 350m. Expect index funds to have a look in the near future.

THE INVESTMENT vehicle Mountcashel, up 5p to a 12-month peak of 123.5p, could soon be reaping an handsome profits on its 8-per-cent-plus stake in telephone company Redstone. According to some whispers, Redstone - which claims to be a mini-Energis - could be about to pull its autumn flotation because it has received an offer from a rival. Any bid is likely to pitched well above the pounds 50-100m pencilled in for the float, netting Mountcashel a tidy sum.