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Market report: Bass takes the shine off the market

IS ANOTHER oil deal looming following the pounds 910m merger between British Borneo and Hardy Oil & Gas? With the crude price in the doldrums oil companies are, on past valuations, looking incredibly cheap. Any group with predatory instincts must feel the time is ripe to strike.

Step forward Ente Nazionale Idrocarburi, the state-owned Italian group. Reports from Milan say it has "talked for ages" about making a takeover bid for Enterprise Oil, up 24.5p at 390p (after 405p).

Like the rest of the industry Enterprise, which has significant Italian interests, has fallen sharply from its rarefied peak. At one time the shares were riding near 730p as its wide spread of interests made it a magnet for any industry follower.

Enterprise and ENI already enjoy a close working relationship and there is little doubt Enterprise, capitalised at approaching pounds 1.9bn, would make an ideal swallow for ENI, which is in the process of being privatised and may feel it needs an impressive deal.

The Italian giant denied earlier this month that it was interested in Enterprise but, intriguingly, added: "Major oil companies are considering ways in which to concentrate their business activities with those of other companies" but it had not "identified specific opportunities to this end".

Enterprise shares were also encouraged by Lehman Brothers support and indications that its Llano field in Mexico had potential reserves of more than 1bn barrels.

Most other oil shares remained in depression but Lasmo, once an Enterprise target, rose 6p to 177p.

The rest of the market failed to hold on to early inspiration, despite increasingly confident talk that lower interest rates are on the way. Although at one time 78.9 points up, the Footsie looked like ending in negative territory until a late burst produced a 10-point gain to 5,291.7.

Supporting shares were for once more resolute, with the mid cap index up 35.3 to 4,758.6, although the small cap had to be content with a 1.9- point advance to 2,091.8.

Brewer Bass was the major blue-chip casualty, tumbling 97p to 725p as profit forecasts were slashed following a downbeat trading statement. Scottish & Newcastle fell 49.5p to 725p in sympathy. But Whitbread managed to shrug off the brewers' droop on the back of Credit Lyonnais support. The investment house cut its profit expectations but moved its stance from hold to buy. Analyst Nick Williamson has lowered this year's expectations by pounds 10m to pounds 374m and next by pounds 30m or pounds 40m to pounds 388m.

Talk of another supermarket price war, usually a phoney exercise, ruffled food retailers. J Sainsbury, said to be leading the campaign, fell 4.5p to 562.5p and Tesco lost 2p to 171p. Asda was hit 4.25p to 180.75p but Somerfield, on the back of an upbeat trading statement, put on 22p to 467.5p.

BG's progress came to a halt on an uninspiring trading statement, with the shares off 19.5p to 375.5p.

BT was dialled 19p higher to 844p after it confirmed it was in the money - more than pounds 4bn. The cash inflow has come from BT's stake in MCI, taken over by WorldCom. The thinking is that BT will hand much of the cash back to shareholders in the form of a special dividend.

Lonrho Africa, part of the once sprawling empire dominated by the late Tiny Rowland, added 4p to 59.5p as Blakeney Management, a US investment group, and its African Lakes associate disclosed a 6 per cent stake and made threatening noises. They are seeking, what they call "constructive" discussions with LA and want to put three directors on the board.

Lonrho, the other half of the split conglomerate, rose 12p to 275p, in part reflecting the recent improvement in the gold price. Claremont Garments provided a reminder that not all takeover bids are profitable for investors: terms of the agreed Courtaulds Textiles offer left the shares off 4.5p to 18p.

Pub companies were tormented by Bass's statement and JD Wetherspoon's neutral comments. Slug & Lettuce fell 15p to 192.5p and newcomer Pubs 'n' Bars 5p to 50p. Wetherspoon hardened 5.5p to 166p.

Imperial Chemical Industries, following the Merrill Lynch downgrading, managed to steady, up 3p to 523p. But British Steel slipped 2p to 100.5p after SG Securities slashed profit forecasts from pounds 420m to pounds 95m and from pounds 690m to pounds 295m.

Avis Europe, the car hire group, reversed 2.5p to 228p with HSBC talking of selling the shares down to 190p. Business Post, with a profits warning, produced the day's biggest fall, off 47 per cent at 365p.

Navan Resources, the Irish explorer, jumped 8p to 40.5p on talk of a major overseas group taking a stake. Emerald Energy softened 0.25p to 8.25p after its comments about "live oil shows" in Colombia.

On the insurance pitch St James' Place put on 12.5p to 296p. There is talk that Prudential Corporation may pounce: the Pru firmed a few coppers to 828p.

SEAQ VOLUME: 1,010 million


GILTS INDEX: n/a More Ofex gloom. The Sandwich Bank & Crust Co was suspended at 12.5p after talking of a reorganisation and "adverse" trading results. It is selling its mobile diner division to focus on its sandwich business and is in talks for new capital to be pumped i n. The group suffered from an unsuccessful float when some underwriters backed out, leaving it short of working capital. The shares were floated at 30p in May. Shares of Powderject, a maker of needleless syringes, rose 9.5p to 414.5p after its reported encouraging results in trials which could lead to a vaccine for skin cancer. The company said studies on mice had showed that the vaccine, delivered throughits helium-powered syringes, destroyed cancerous cells in mice. Powderject shares have been as low as 180p since they arrived last year; earlier this year they reached 512p.