NatWest's eight-page analysis, More Blood to Spill by Neill Junor and Fiona Matheson, advises investors to reduce stakes in United Newspapers, Daily Mail & General Trust, and the Mirror Group.
'The whole industry faces a protracted period of turmoil. Whether the Express, Mail or Mirror cut their cover prices or not they will continue to suffer significant costs,' it warns.
Shares in United Newspapers lost 9p to 529p and Mirror Group fell 8p to 128p. Earlier this year, Mirror Group, a shareholder in the Independent and Independent on Sunday, traded at a high of 203p and United at 731p.
Most of the bigger price war battles have involved the broadsheets, led by News International, steady at 243p. It slashed the price of the Times to 30p and then to 20p as The Telegraph, unchanged at 368p but well adrift of its year's high of 622p, cut the price of its daily paper to 30p.
NatWest's analysts said: 'It must be only a matter of time before the mid-market cracks. We would be surprised if the Express does not move its price to 25p, or even 20p in the near future.'
Daily Mail ordinaries eased 2p to pounds 13.63 and the 'A' shares fell 13p to pounds 10.23. Respective highs this year were pounds 16.50 and pounds 14.84.
NatWest believes all the newspaper publishers are overvalued, despite the falls in the sector. Companies involved with the industry's main raw material, however, were buoyed yesterday on analysts' optimisim about rising prices for paper.
The British newsprint market is described as being extremely tight, with producers pushing through price rises of between pounds 10 and pounds 13 a ton.
Jefferson Smurfit also continues to bask in favourable sentiment from its pounds 680m paper and packaging deal this week in France. Shares touched another all-time high, rising 9p to 414p.
Its sectoral neighbour Bowater climbed 9p to 470p. The rise was partly fuelled by a rumour in early dealings of a possible takeover move by Hanson, down 1.5p to 262.5p.
Bowater was also supported by strong overnight US demand, which left the the market short of stock. About 1.7 million shares were traded.
A paper shortage of a different kind sent Euro Disney's shares on a rollercoaster ride. The price climbed slowly from 127p to 135p, then raced downhill to 123p in late dealings. A large short position is distorting the market, according to brokers, with short- sellers unable to deliver stock.
Euro Disney shares were heavily shorted ahead of and during the recent rights issue. 'All the stock is now in Paris,' one dealer said.
Over the past few weeks, the Stock Exchange has had to issue hundreds of buying-in notices to the market, offering holders increasingly higher prices to part with stock to settle bargains.
The buying-in transactions are at the expense of the party unable to deliver. Last week holders were offered a premium of up to 20p for immediate delivery, because it can take up to two weeks to transfer shares held in Paris.
Elsewhere in London, dealers were on the swings and roundabouts. An opening fall of 10.2 points in the FT-SE 100 share index was rapidly clawed back by persistent speculation about takeover targets and optimism on short-term interest rates.
The 100 index closed 17 points higher at 3,167.5, and the FT-SE 250 gained 14.7 to 3,714, making this week one of the best this year for the market. The 100 index climbed nearly 85 points during the five days, the 250 by 75 points.
Takeover rumours lifted Unigate 15p to 380p. The story doing the rounds was that it might sell its 33 per cent stake in Nutricia, the Dutch group, and bid for Hazlewood Foods, up 9p to 145p. There was also speculation about imminent board changes at Hazlewood Foods.
Merchant banks performed strongly on hopes of further business from takeover bids and new issues.
Kleinwort Benson spurted 25p to 522p, Schroders moved up 45p to pounds 13.13, SG Warburg improved 20p to 783p, and Hambros rose 7p to 313p.
Tiphook reclaimed ground lost on Thursday when the price fell on talk of a deeply-discounted rights issue with next week's final results, which are expected to show losses of more than pounds 200m. The share price ended 4p better at 34p.
Share prices registered good gains as the week drew to a close. The FT-SE 100 share index advanced 17 points to 3,167.5, and the FT-SE 250 increased by 14.7 to 3,714.9. Volume was solid for a Friday, with nearly 600 million shares changing hands.
A modest premium is expected when dealings in Kitty Little, under its new name of Eyecare Products, resume on Tuesday after a four-month suspension. Last month pounds 18.4m of shares were placed at 30p to pay for L'Amy, the upmarket French maker of spectacles. Signs are the new shares could trade up to 35p in initial dealings compared with the suspension price of 41p.
Bill Ainscough, deputy chairman of Wainhomes, took advantage of the poor share price performance since the company came to market in March. He bought 380,000 shares at 131p each to take his holding to 14.6 million, or 23.55 per cent. The purchase comes three days after an upbeat annual meeting. Shares in Wainhomes, floated at 170p, rose 4p to 133p yesterday.
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